Six months of frenetic activity have left the FTSE 100 barely 20 points higher from where it started the year. Yet again light volumes are seeing the market move back and forth on little news, with worries about Iraq having replaced the Federal Reserve as the big concern.
US markets dropped by a whopping 0.7% last night, but it was the rapidity of the move, rather than the actual percentage change, that should serve as a warning that markets are still vulnerable. Compared to what could happen if the Iraq situation really worsens, such moves are just ripples on the surface. Already this morning major indices have bounced off their lows, proving the truth of the current adage that no dip in this market is too small to be bought.
The Dow’s decline last night means it is barely two-thirds of 1% off its all-time highs, and thus the default setting should still be bullishness, if with a greater degree of caution. More bad news is expected on US GDP, but given we’re now on the cusp of Q3 the impact of even a significant downward revision is likely to be minimal. Durable goods should carry more weight, but already futures are beginning to edge higher, indicating there are still buyers willing to step in. Ahead of the open, we expect the Dow Jones to start 23 points higher at 16,841.