FTSE races higher as Europe lags

Heading into the close the FTSE 100 is 40 points higher, lifted by miners and banks, as poor US data casts a shadow over a December rate hike.

City of London
Source: Bloomberg

Today’s market action, where the FTSE 100 has definitively outperformed its continental peers, is almost the opposite of Monday. A strong showing from bank shares in the wake of the Bank of England’s stress tests, and an impressive bout of bargain hunting in mining firms following this morning’s China figures, put the index back on course for 6400.

Strong data from the eurozone has made investors jittery about the prospect of eurozone QE; having cruised serenely higher of late on assumptions that Mario Draghi will don his Santa hat early, it appears that markets are now having doubts at the eleventh hour. Certainly, it does seem odd to contemplate fresh easing when unemployment in the eurozone’s strongest pillar continues to touch fresh lows.

However, it was the US where the most interesting developments were to be found. After yesterday’s dire Chicago PMI number, Tuesday offered up the first contraction in the ISM manufacturing index for three years, as the overall figure hit a six-year low. This muddies the waters considerably on a Federal Reserve rate hike, and may well provide the cover the Fed seeks should it choose not to move in December.

Late-comers to the US dollar rally felt the pinch, as the Dollar Index trimmed gains made over the past two sessions, and while December still seems a likely possibility, the recent numbers will underline concerns that the Fed is too fixated with the idea of getting in a hike before the end of 2015.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.