Small gains for indices but pre-ECB nerves persist

The day has started in better fashion for indices, with Europe putting in a decent performance and the FTSE 100 lagging behind.

City of London
Source: Bloomberg

Modest losses in mining names aren’t helping the picture, but we are seeing decent performances from heavyweights like HSBC, Prudential and Reckitt Benckiser that are aiding the bullish move.

Last night in the US saw the much-needed lower close, which bulls would argue is a necessary precursor to more gains, in order to take some of the heat out of this market.

The S&P 500 continues to be trapped below key resistance at 2000, but this is more likely a symptom of the overheated rally than the beginning of a serious downward move. Should we finally be able to muster a close above 2000 in the coming days, then bullish momentum is likely to accelerate.

London has seen a steady rise in the percentage of companies hitting new monthly highs, a bullish development, with similarly strong performances in the DAX and in US markets. Much of the performance of equities in recent weeks has been down to movements in oil markets, and yesterday’s weakness inevitably led to losses for stock markets. Over the past week, it has been the Nasdaq that has failed to make any upward progress whatsoever, and this must be chalked up to the absence of oil and raw material firms from the tech index.

For Europe, the main event is still more than 24 hours away, and so we are likely to see further indecisive trading abound. Nonetheless, so long as the DAX holds above 9500 and the FTSE 100 clings on in its current 100 point range between 6100 and 6200, then the outlook remains positive for bulls.

Those watching oil will need to keep an eye on WTI, which failed to hold above the key $38 resistance level yesterday. However, dip buyers overnight have come in to stabilise the situation, which makes it more likely that we will see gains above this key resistance from January and February. Clearly, oil inventory data today will also be a crucial moment, but if the picture from last week, that of falling US output, is repeated then the ongoing move upwards in oil prices is likely to continue, adding to the generally optimistic picture for equities.

FTSE risers and fallers (as of 10am)

Company % change Index points
HSBC Holdings +1.26 +4.3
Glencore +4.08 +2.59
Prudential +1.7 +2.23
Reckitt Benckiser +0.77 +1.23
SSE +2.09 +1.15


Company % change Index points
Shire -1.96 -1.65
British American Tobacco -0.37 -1.09
Ashtead -5.17 -0.87
Burberry -2.46 -0.62
AstraZeneca -0.31 -0.61

The day ahead

Economic news:

3pm – UK NIESR GDP estimate (three months, February): prior 0.4%. Market to watch: GBP crosses, FTSE 100

3pm - Bank of Canada interest rate decision and statement. rates are tipped to remain at 0.5%. Market to watch: CAD crosses

3.30pm – US oil inventories: stockpiles are tipped to fall to 0.8 million barrels from 10.4 million barrels. Market to watch: US light crude.

8pm – Reserve Bank of New Zealand interest rate decision and statement.rates are anticipated to remain at 2.5%. Market to watch: NZD crosses

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