UK Market Comments

Heading into the close the FTSE 100 is down 19 points at 6369 as financials lead the market lower.

UK markets

The British banks may have passed the European stress test but for traders the margin by which Lloyds passed was too close for comfort. It hardly instils confidence in the UK financial sector when the big five banks are given the all clear but the sector still finishes lower. The timing of the stress test could not be worse, with Lloyds and Standard Chartered issuing interim management statements tomorrow. Emerging markets-focused Standard Chartered has a heathier balance sheet but the slowdown in China and tighter regulation in South Korea will take the gleam off the update. Bailed out Irish lender Permanent TSB plummeted 15% in early trade after it failed the stress test, but it managed to pull back most of its losses and is set to finish 3% lower. Mineral extractors keep edging lower as the cracks are appearing in China’s property market.

US markets

In the US, the Dow is down 19 points at 16,786. The earthquake caused by the European banking stress tests has shaken the US market, and news reports of another person being treated for Ebola in New York is looming over the equity market. Adding to the mixture of uncertainty were disappointing service PMI and pending homes sales figures. The Fed is pencilled in to bring an end to its bond-buying scheme this month, and traders were hoping the economic announcements would go out with a bang. Twitter will reveal its third-quarter figures after the closing bell. The microblogging service has a history of choppy trading when results are posted. The average daily move on results day is 17%.

Commodities

Any sign of oil making a recovery has been reduced now that Goldman Sachs has cut its outlook for WTI and Brent by $15 each, with more downgrades likely to follow. Gold has lost its golden boy status. The metal is offside on a day when global equity markets are all in the red and volatility has jumped. If it can’t attract speculators on a day like today its outlook isn’t rosy. Copper is clawing back lost ground but the red metal is desperately seeking a stimulus package from China to drag it from its slump.

FX

Sterling is going full steam ahead versus the green back as less-than-impressive housing figures from the US gave traders a reason to take a punt on the pound. Wednesday’s FOMC meeting is the focus of the week, and with the Fed’s QE policy coming to a close this month all eyes are now on the interest rate. The euro wasn’t stressed by the stress test. Traders shrugged off the large number of banks that failed the test as the core eurozone banks received a clean bill of health.