Scottish referendum still weighing on FTSE
Oil firms are feeling the impact of a declining oil price, while the broader FTSE is still feeling the impact of the upsurge in pro-independence sentiment north of the border. While equity indices are still in a ‘buy on the dip’ mood, the lack of positive data so far this week has left markets to fret about the wider consequences of a break-up of the UK.
However the dip in Lloyds yesterday, back towards 72p, has seen the usual raft of buyers come in, as short-term traders continue to take full advantage of the 72p – 80p range that has dominated since April.
Bargain hunters have alighted on Morrisons again, buoyed by broker comment that suggests the dividend is safe for the moment, but that assumption could look increasingly shaky if trading doesn’t begin to turnaround during the final quarter of the year.
On the face of things the TNS poll today has given the impression that the shift towards a ‘Yes’ vote is continuing to gain momentum, although the impact has not been as heavy on the FTSE and companies with significant Scottish exposure as yesterday. Meanwhile, the IG binary has edged back from a 30% chance of a ‘Yes’ on Monday to 27% today, as concerns ease slightly. The arrival of the three UK party leaders in Scotland tomorrow smacks of a last ditch attempt to recover the situation, but even with the ‘Yes’ campaign looking confident the outcome is still too close to call.
Traders await Apple announcement
The small drop in the S&P 500 will be welcomed by a lot of investors, who may well have missed the August bounce due to holidays or fears about an intensification of the Ukraine crisis. The market had generally overreacted to the Ukraine ceasefire and ECB news, leaving equities looking overextended, so another short-term bout of weakness, nicely timed with the St Leger Day race this weekend, could provide the opportunity many are looking for.
Also holding back traders this afternoon is the Apple announcement, set to kick off at 6pm. A failure to unveil a big new product line could see the shares take a more impressive tumble than that seen last week, but a price tag closer to $90 than $100 for the shares would tempt many to back this perennial outperformer for the longer term.
US dollar weighing on commodities
Precious metals are being held to ransom by the stronger dollar, which is going back to levels not seen since the middle of 2013. The Ukraine ceasefire is still holding, taking away one of the key props to the gold price, while silver seems determined to head back towards the June lows around $18.75 as equities and the US currency continue to hold all the attention.
After a brief rally this morning oil prices are turning lower, and this will prompt worries across the oil-exporting nations, especially Russia, whose resurgent power depends on a robust oil price.
Carney wades in on Scottish debate
If Mark Carney’s intention today in his speech to the Trades Union Congress was to communicate a clear idea of monetary policy, he seems to have misjudged things. His suggestion that a rate rise will come in the spring of 2015 marks a change to the more dovish direction of interest rate commentary, providing a brief respite for the pound. However, any hope of a more sustained bounce today was dispelled as Mr Carney waded into the Scottish independence debate with a warning about a shared currency and sovereignty. This late intervention will likely have little impact on confirmed ‘Yes’ voters, but might stay the hand of some wavering ‘Don’t knows’, who will have seen the turmoil created in the eurozone and will worry about a repeat performance in the British Isles.