UK Market Comments

Indices remain in the red, but off the lows, as the low-volume tussle between bulls and bears goes into a second day. The FTSE remains unable to push through 6880, but so long as it remains within striking distance a run to 6900 cannot be ruled out.

UK markets

As the US opened, we saw the FTSE 100 slowly begin to recover some of its losses, as yet again US indices drew the London market higher, if only slightly. Traders hoping to see the FTSE finally break out of its range will therefore be hoping that it is improving global data, rather than any signs of improvement in the UK, that will drag the market upwards. Shares in Sainsbury’s remain unmoved ahead of figures tomorrow, but the decision to focus on online clothing seems more logical than Tesco’s ambitions to become the face of British banking. Sainsbury’s has been shown to have its eye on the ball more consistently than its bigger rival, and while both have suffered this year, it is
Sainsbury’s that still seems to be in the ascendant.

US markets

It remains to be decided whether the drop in US equity buying is a reason to be positive or negative. For the pessimists, the lack of participation signals that the market lacks the legs to see further gains, since the necessary flood of money isn’t there. The optimists, on the other hand, would point to this as an opportunity for fresh funds to enter the fray. Even if they do eventually come into play, it is unlikely to be over the summer. The net result is that we seem likely to endure more volume-light, directionless days, while volatility remains low and makes existing investors nervous.

Commodities

Demand expectations continue to support crude oil ahead of the OPEC meeting this week, with no sign of major selling. The expectation here is that supply levels will remain unchanged, as members of the global body look to profit from elevated prices arising from supply tensions. A classic ‘buy on the rumour, sell on the fact’ looks to have evolved, and once the meeting is completed the commodity might struggle to continue upward progress, particularly as NYMEX heads back towards recent resistance around $105. Gold and silver continue their recoveries from near-term lows, but for gold the 200-day moving average around $1280 remains the major upside resistance.

FX

Losses in EUR/USD have been extended this afternoon, but this is due more to dollar strength than euro weakness. Yields are playing their part here too, and so long as some peripheral eurozone nations see their yields below the US, investors will gleefully choose Treasuries, with higher payouts and greater safety, over the apparently now ‘safe haven’ bonds of the eurozone. Like low volatility, such depressed yields should be flashing warning signs for the more risk-aware.