Market Comments

Heading into the close the FTSE 100 is 20 points higher, as the mining sector puts its best foot forward for a change.

UK markets

Other indices have had a choppy day but the FTSE has clung on stubbornly to its gains, thanks to Chinese GDP data that came in just ahead of estimates. Although hardly enough to get excited about in the longer-term, the data was enough to prompt a resumption of buying in mining stocks, on the hope that the general view of the sector and Chinese growth had become too negative. Nonetheless, further Chinese data later in the week needs to step up and maintain the positive image, lest today’s gains slip away. Shares in BA owner IAG touched a seven-year high today, as the rout in oil prices added to the generally rosier outlook for airline shares. Both IAG and easyJet enjoyed gains of over 2%, and while the former might face some hurdles in its quest for Aer Lingus, the fact that a bid is still in play is testament to the confidence the firm has in the outlook. European indices had a good morning but were dragged lower during the afternoon, partly thanks to a weak open in the US and partly due to some jitters around the ECB. The return of volume following the US holiday has also muddied the waters, even if the general expectation is still that QE is coming down the slipway.

US markets

US futures had pointed towards a decent open for Wall Street following its day off yesterday but in the event indices rapidly turned southwards. Earnings season continues to paint a decidedly mixed picture, although it is hardly surprising that a company like Halliburton would strike such a cautious tone on its outlook given the rout in oil prices in recent months. Morgan Stanley joined the roster of banks that have seen fixed income trading revenues slump, although in this case the performance was even more abysmal – Morgan Stanley shares continued their 2015 drop, down more than 1.4% today and off by over 11% in the year so far.

Commodities

Gold saw its price touch a four and a half month-high, as buying pushed the metal back above $1290. With central banks dominating the news at present, investors have opted for the safe haven trade once more, moving funds to a commodity where they believe the writ of powerful monetary officials does not run. Deflation and the damage this does to yield means that gold has become more attractive – it may not have a yield, but neither does it have a negative yield either. Deflation and negative rates are all the rage, making it easier to construct an effective case for gold, something that has not been easy in recent years.

FX

The pound has spent the day rallying against the dollar ahead of a slew of news regarding the UK economy and BoE monetary policy. Good news on UK unemployment could help sterling hold on to its gains, but it is the minutes of the latest BoE meeting that will command the most attention. Will the fall in consumer prices clip the wings of hawks calling for rate hikes? If so we could see the pound drop back once more as the chances of a UK rate increase are pushed back yet further.