Mining sector holds back FTSE

In early trade there is a more muted tone in equity markets after the surge witnessed yesterday.

In some respects the lack of momentum to the upside tends to give credence to the theory that much of the advancement yesterday was less about sentiment and more about short covering. An element of profit-taking, along with the remarks from China’s finance ministry which are attempting to temper expectations in respect of the country’s global growth, is putting some pressure on the mining sector. Fresnillo, the top gainer yesterday, has pared back by 2.68% while Reckitt Benckiser is off by 3.43% owing to price target cut from Nomura brokers. An upgrade to neutral for Resolution from the same broker has seen the restructuring company head up the FTSE 100, adding 2.6%.

UK construction output came in flat in May, with year-on-year output dropping by 4.8%. Poor weather has been given the blame and despite the fact that the sector makes up no more than 7% of the UK economy we saw the pound come under some pressure as a result.

Irish eyes may be smiling today following a positive upgrade on its economic outlook from credit ratings agency Standard and Poor's. The credit rating itself for Ireland remains unchanged but has a 30% chance of being boosted in the next three years. With this decision coming in the same week that the agency was prompted to downgrade the sovereign debt of Italy, it can be treated as positive, but given that Ireland has recently been plunged into recession once again, it may merely be yet another exercise in complacency.

The US producer price index is expected to remain the same as the last outing, with consensus estimates for a rise of 0.5% in the month. Given that this is a leading indicator of consumer inflation, any significantly higher number will tend to give the US dollar a boost. US consumer sentiment will also be released from the University of Michigan, and a better statistic is expected this month with 85.3 the median forecast. While it is considered a key measure of financial confidence, it does tend to follow equity market moves. The Dow is set to open down by 11 points from yesterday’s close of 15,460.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.