Markets are clearly biding their time, as there is little doubt that the main event this week will be Ben Bernanke’s two-day testimony.
We could lay today's blame for the sideways movement of European equity indices on the unexpected decline in the German economic sentiment survey, which fell for the first time in three months. The data point was the only real item of note in Europe today, as year-on-year inflation for the eurozone came in at 1.6% as expected.
European car sales were abysmal, falling to a 16-year low with year-on-year sales for June declining by 6.3%. The extreme levels of unemployment in Europe have been blamed.
Fresnillo took the FTSE's top spot today, adding over 5% despite the non-existent moves in the metals market. Citigroup reiterated its neutral rating on the stock. Standard Chartered lumbered at the bottom with profit-taking clearly setting in, as the stock had added over 10% in gains month-to-date.
Inflation in the US rose more than forecast, increasing 0.5% in the month against the 0.3% expected. Higher gasoline prices, rising over the past four months, made up almost 70% of the CPI gain.
The US homebuilders index touched its highest level since January 2006.
Slowing consumer demand in Western economies was reflected in the lower-than-expected second-quarter sales from Coca Cola. Earnings were weaker, with the group earning $2.68 billion or 59 cents per share, a figure down 4% from the previous year. Blaming the poor performance on bad weather and the challenges seen in global economies, the share price shed 3% in pre-market but has recovered somewhat since market open.
The Dow Jones is currently trading down three points at 14,481.
Much of today’s action was contained in the foreign exchange markets, with the Aussie dollar capitalising on the lack of action from the Reserve Bank of Australia. The degree of bullishness surrounding the US dollar has tempered somewhat, and the Aussie has now risen 4% against the greenback over the past four days.
The euro was also a strong contender, rising through the 0.87p mark against the British pound for the first time since mid-March of this year. Statements from key European sources which have advocated the possibility that negative interest rates will be introduced by the European Central Bank are being ignored for now. As yet it is too early to tell whether or not traders believe this event will happen or if we are simply seeing the unwinding of long dollar trades.
US light crude and Brent oil prices are both consolidating following the three-week consecutive gains. The spread differential has tightened, and is now under $2. The unwinding of the long dollar trades and any dovishness from Mr Bernanke tomorrow will be likely to underpin the current upward trajectory.