Market Comments

Equity markets have baulked at the idea of setting new highs and instead chosen to limply give up early morning gains.

UK markets

Germany’s pre-market monthly retail sales jumped aggressively higher, taking it back to levels last seen in the early 1990s and stimulating the debate about how successful the ECB’s actions have been in raising confidence levels. Earlier today Mark Carney was grilled by the Treasury Select Committee over the Bank of England’s monitoring and handling of the forex markets while institutions conspired to rig them. Regardless of the fact that the BoE has ultimately been cleared its reputation has taken a beating.

Despite the better-than-expected £5.5 billion full-year pre-tax profits, Barclays’ shares have spent the day sold off and in the red. As much as CEO Anthony Jenkins might wax lyrical about the turnaround in the company, the continued requirement to top up provisions for the mis-selling of PPI and the indiscretions in the forex market have seen investors focus on the legacy issues rather than the future. The figures have also triggered a £1.1 million bonus for Mr Jenkins and once again put the topic of remunerations into the public domain. Having already seen Bovis Homes and Barratt Developments post impressive figures, it is no surprise to see Taylor Wimpey post profits up by an impressive 68% on the year. Like its counterparts the government’s Help to Buy scheme, coupled with changes to stamp duty, must take proportional praise for these profits. Ashtead, the rental company that leases industrial and construction equipment, has seen its focus on the US markets rewarded with an increase in profits of 33% in the last quarter, enabling the company to increase its profit expectations for the third quarter in a row. Company CEO Geoffrey Drabble pointed out that business was still some 30% off the historical highs and that a full recovery was still a number of years away.

US markets

The congratulatory backslapping of NASDAQ traders, as the index hit 5000 and reflected on where it had come from, has been short-lived as European negativity has swiftly crossed the Atlantic and dented US traders’ moods. A more cautionary note has been struck today as investors prepare themselves for tomorrow’s ADP non-farm figures and the release of the Fed Beige Book, with both setting the tone for the heavy economic releases that will run all the way to the weekend.

Commodities

Brent crude continues to oscillate either side of the $60 level and today it is the turn of the bulls to state their case for a move higher. As the commodity moves ever closer to overbought territory, and brushes up against the 100-day moving average, there is a feeling that its time at these rarefied levels is coming to a close. Gold continues to swing about with limited conviction, and only a close below the $1200 level would offer conclusive proof that it has finally settled on a return to its previous negative stance.

FX

Even without the Greek issue hanging over the market, euro traders have found it difficult to become more optimistic about EUR/USD as the dominant dollar has squeezed the currency cross lower. The worrying picture of the French economy, which yesterday’s manufacturing figures offered, highlights how it is not just Greece that should be closely monitored. Last week’s brief pop above the 100-day moving average lasted less than 24 hours and reveals a currency market not yet ready to believe the bearish moves in GBP/USD have come to an end.