Despite marginally higher trading volumes in the FTSE 100 today, stocks appear stuck in a rut as investors absorb recent reports that the US is to go down the negotiation rather the military intervention route. The fact remains that the congressional vote on military action is merely delayed rather than ruled out.
In contrast to its customer Apple, ARM Holdings has benefitted hugely today from the less-than-innovative new iPhone models. The stock has added 4.17% on the belief that the chip designer will receive an increased royalty rate.
Lower metals prices have weighed on some of the miners. Randgold Resources shed 2.62% today alone, adding up to a total decline of over 16% in the last two weeks. News that Mali’s new government is intending to renegotiate existing mining contracts which are not of benefit to the country is keeping bargain-hunters at bay.
Weighing on markets too is the prospect that a higher base interest rate from the Bank of England is on the cards sooner rather than later. This is well flagged by the rise in UK bond yields. While the decline in unemployment levels to 7.7% over the last three months can be construed as good news, despite the fact that many jobs were of the part-time variety, one has to feel that perhaps Mark Carney should have chosen a different metric on which to base any rate decisions.
The markets were expecting more from Apple and were left disappointed. The share price fell 5.2% in early trade, and seems to have set the tone for the overall US equity trading session. Ironically, IBM and Microsoft are the two biggest movers on the Dow, adding 1.36% and 1.03% respectively.
Corporate bonds were a different story altogether, with Verizon Communications initiating a record issue of $49bn worth of bonds in order to raise funds for the planned buyout of Verizon Wireless. The move by the giant telecommunications company serves to indicate that many are expecting to see asset-purchase tapering at the next meeting of the Federal Reserve. At the time of writing the stock price was trading flat on the day.
There was very little macro data released to cause any real movement in markets. The US wholesale inventories barely stirred in July, edging up 0.1% and suggesting that business spending will have little impact on GDP in the third quarter.
The pound was the outperformer of the G10 currencies, finding a way through the 1.58 level against the greenback on the better UK employment numbers before staging a modest retreat. Sterling has now gained 6.5% against the US dollar since early July. Unless the 1.5685 level sees a breach to the downside, the trend is for additional sterling upside.
The commodity currencies were out of favour, with the Australian dollar and New Zealand dollar losing some of the momentum seen recently on the back of weaker resource prices. Fitch Ratings has lowered its price assumptions for copper and nickel over the next couple of years, owing to built-up inventories in iron and nickel.
Gold prices pushed into oversold territory, having lost 4% over the past week yet succeeded in retaining the short-term uptrend which has been intact since the $1180 lows back in late June. Investors showed a modest appetite for the metal around the $1356 per ounce mark. Any break below $1350 sets us up for a return to $1325.
Oil prices have slipped back as the Syrian military intervention tensions eased. The spread between the US and UK crude contracts has narrowed to less than $3, with UK Brent crude seeing a brief foray below the pivotal $110/bbl level.