Quiet afternoon caps FTSE

A dearth of economic news and low volumes kept the UK benchmark capped today.

European markets

Mixed corporate earnings saw rising shares fail to compensate for the fallers, and the lack of temerity to break higher has seen the FTSE deliver a lower close for the first week in five. Profit warnings from major German companies have colluded to reduce the amount of risk being taken and given that we have seen gains to date of over 5% for the UK index, it is no surprise that investors are booking profits ahead of the weekend. Nevertheless, the threat of a fall below key support levels as we go into the close could invite a bigger sell-off next week if central banks fail to deliver.

Pearson held the top spot all day long as investors concentrated on the 5% rise in sales and the potential for a sale of the company’s Mergermarket business. The publisher rose over 8% despite showing a loss of £8m in the first half of the year.

BSkyB reported excellent earnings, with profits up 9% and a share buy-back of £500m announced. Investors have chosen to focus on the imminent competition from BT which will launch its free sports TV package next month. The shares sunk over 3%.

US markets

A six-year high on the University of Michigan consumer sentiment index gave the US indices a mild shot in the arm just as the markets opened. The sentiment lacked longevity and we are now seeing markets plunge lower with the Dow losing over 100 points in the first 90 minutes of trade as the mood from Asia makes its way westwards.

Once again, it’s the mixed earnings picture that unsettling the markets along with the confusing messages coming from certain US Federal Reserve members with regard to future policy. The 1700 level on the S&P 500 has been tried but not actually tested, while the 15,600 level on the Dow is proving a worthy taskmaster to date.

Expedia was a significant faller on the S&P, dropping 25% as investors digested yesterday’s news that Q1 profit had fallen by over 30%. Starbucks was wide awake, adding 7% on better-than-expected quarterly profits.

Commodities

While gold has succeeded in gaining some 9.4% over the past three weeks, the lack of any new information from the Federal Open Market Committee has led to capped gains, with the shiny metal still reeling from the 21% year-to-date loss.  The price fell to $1313/oz and will need to stay above the $1300 level in order to bring about additional upside. Next week’s Fed meeting may give us some further indications for the dollar destiny which will be likely to help investors derive a meaningful direction.

FX

Sharp gains in the euro were a bride too far around the 1.33 level, in spite of the five-week low for the dollar index. The good news this week in terms of eurozone PMI is that improving Spanish unemployment has helped to spike the single currency, but there is still a tiny possibility that we will see some dovish rhetoric from EU sources in the coming days ahead of the ECB meeting. A higher euro is not conducive to continuing European growth.

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