A lack of any economic data today sees the UK blue-chip index finding the air thin above the 6200 level in early trade and the FTSE is hugging the key 200-day moving average, which normally helps separate the bias between bullishness and bearishness. Stocks that were kicked to the kerb by investors yesterday are back in favour as the bargain hunters looked for value in the beleaguered mining sector, which has been under pressure for much of this year owing to weaker metal prices and the perceived slowdown in China.
Gold has staged a mild rebound but remains hampered by the $1300/oz level. The hiking of margin requirement from the CME Group in Chicago is also lending a gravitational effect to the metal. The Peoples Bank of China stepped in to lessen the credit crunch that was threatening to overcome the Chinese banking sector and this has helped to assuage investor nerves for now. Credit rating agency Fitch has stated however that liquidity risks are rising in the world’s second biggest economy.
There does appear to be a certain predilection towards the defensive sector with the likes of drinks giant Diageo adding 2.04% and insurance company Admiral Group adding 2.44%, as both stocks top the leaderboard. This indicates that the risk-aversion is likely to be a continued theme this summer unless we see a broad- based economic pick-up. The Dow Jones is set to open down 82 points from yesterday’s close of 14,758.