The party season is well and truly over, and City trading desks are back to full capacity. However, market volumes are yet to hit their full stride. Traders are looking to keep their powder dry, as later in the week we have a wide array of equities posting seasonal sales, plus economic data releases that are poised to shed as much confusion as light.
UK volumes picking up
The morning session on the FTSE had the feel of the first proper day back in the markets following the festive break, as volumes started to look closer to the norm. The January obsession with last month’s sales figures will no doubt be fuelled later in the week as the markets gear up for results from Sainsbury's, Tesco, Asda, Greggs and Marks and Spencer.
Although the picture is far from rosy, the gloom has partially lifted from Royal & Sun Alliance shareholders. PwC has confirmed the £205 million bailout of the insurer's Irish unit will be a one-off rather than the first of many. Unsurprisingly, the removal of this potentially bottomless pit from the equation has helped RSA shares move higher by over 7% on the day.
Fortuitously coinciding with the revival in gold’s fortunes, Centamin has announced a rise of almost 5% in its annual production of the precious metal. However the bigger issue of the fragile relationship and stability of the Egyptian government still remains.
Fed vote unlikely to ruffle US markets
Today should see a rubber stamp for Janet Yellen as the next Federal Reserve chairperson following tonight’s nomination voting. This is unlikely to cause much of an issue in the markets, as the vote looks very much like a formality.
The institutional honeymoon with Twitter appears to have come to an end, as increased questions are being raised over the share's price-to-earnings ratio. As a result, confidence has been shaken and price targets lowered to $44. The current market price stands at a healthy premium to these targets and highlights the nervousness being felt ahead of the company’s earnings figures, which are due for release on 30 January.
Cautious optimism on commodities
Gold has today broken above the 50-day moving average and, dare we say, is looking a little sprightly. As promising as this performance may be, the longer-term negativity towards the precious metal is still in place, and as yet the bulls will be keeping the champagne on ice.
Copper has had an inauspicious start to the year, and Asian demand has been unable to drive the price higher. However, with the coming days likely to offer further clarity on the Fed's thinking, we could start seeing a better reason to invest.
An interesting week ahead for the dollar
EUR/USD has broken back through the 100-day moving average today, and is struggling to find further support above its November lows. But, with plenty of sentiment-shifting economic data about the EU due out this week, this is far from a foregone conclusion. Wednesday will see the release of the latest EU unemployment figures and the last set of FOMC meeting minutes, both of which could give EUR/USD a directional shove.
December was a particularly positive month for the Japanese government, as the yen continued to weaken against the US dollar. However, January has yet to replicate this pattern. Any retest of the ¥104 level would no doubt see the Japanese prime minister sitting a little less comfortably in his chair.