UK markets
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The FTSE has shed its morning gains, and is around five points lower heading into the close. However, this is more of a modest selling ahead of month-end, and with the US on holiday next Monday conditions are ripe for a quick low-volume melt-up before the real trading begins again in September. Speaking of sudden moves, the 16% surge in ASOS today will come as a welcome relief after the steady declines of the past few months, but the euphoria could evaporate rapidly if no US suitor confirms their interest in the online retailer. Tesco shares have given back some ground today after news of another drop in the firm’s market share. It seems the bad news is not out of the way just yet, and we can expect to see the smaller rivals like Lidl and Aldi expand their share in coming months.
US markets
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Much will be made of the S&P 500’s slip back below 2000, as if a drop below a large round number was somehow more important than a rise above it. The small profit-taking is more a reflection of a slow news day, rather than any increasing concerns about valuations. In fact, the market as a whole seems much more relaxed about stock valuations at present, helped by a relatively upbeat earnings season. Equities are still the place to be overall, especially now that geopolitical tensions have disappeared from the headlines.
Commodities
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It’s day two in gold and silver’s attempts to rally, but once again they have run out of upward momentum within the space of a few hours. As the Jackson Hole effect wears off in equities, so it does in commodities – without an explicit signal from the ECB about real QE there will be no rush for gold, leaving the metal unable to break through the 200-day moving average once again. The $1280 level marks significant support however, so for now gold seems trapped between a rock and a hard place. The past few days have seen oil rise slowly from multi-month lows, even as the number of new discoveries in the past year remains near record lows. For now though, with shale reserves still cushioning the market it is unlikely we’ll see much of a rally.
FX
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Traders briefly saw a new 19-month low for the euro against the US dollar, before a modest recovery allowed the single currency some respite. Those hoping for dramatic action from the ECB at its next meeting are likely to be disappointed however, and this could lead to some short-term strength for the euro heading into September. The move into eurozone bonds in recent days has been dramatic, but the market has likely got ahead of itself once again in thinking QE is a done deal.
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