Market Insights

Heading into the close the FTSE 100 is 30 points higher, although it has been left far behind by rallying markets in Europe and the US.

UK markets

Normal service has been resumed in UK markets, as the main London index fails to keep pace with gains by its peers on the continent and on Wall Street. Comments from China have certainly helped UK traders to find the confidence to step back in, but the start of the General Election and speeches by the main leaders have conspired to prevent further gains as investors worry about the consequences of an indecisive result. History teaches us that the polls are often misleading, and two polls within 24 hours, each showing one of the two main parties four points ahead, underscores this point. IG’s general election binary continues to point to an 83% chance of no one party having overall control, with both Labour and the Conservatives expected to fall short of a majority. However, as we are now much less sure that the post-election PM will be David Cameron, the IG binary is now giving him a 55% chance of remaining in Number 10. Standard Chartered shares are still much in demand, thanks to expectations of a new broom in management that will restore the bank’s fortunes, with hints of fresh monetary easing in China also helping to provide a more optimistic picture of the bank’s future.

US markets

US markets have been firmly in the ascendant, starting the week on the front foot and looking to regain most of the losses witnessed in recent sessions. It is a week for US data, culminating in non-farm payrolls on Friday. The problem of course is that we’re still looking for a ‘Goldilocks’ situation, where data has to be good enough to encourage equity investors to get involved, but not so good as to cause market jitters about a premature US rate hike. It seems unlikely that the market can get through the coming month without at least another tightening panic, so investors should brace themselves for a bumpy ride.

Commodities

We can safely say that the rally in precious metals has run its course for the time being, as economic gravity reasserts itself and the US dollar finds fresh buyers. The pattern of lower highs is seen once again, as gold and silver both move into reverse gear. Copper however is in demand thanks to Chinese stimulus talk, but any new efforts by the PBoC are unlikely to resemble the gargantuan efforts of old.

FX

The Y120 level was seen once again in USD/JPY as buyers stepped up to the plate, while the new week has begun on a tough note for the euro as shorts look to drive the single currency down after its brief resurgence last week. The steady drip of economic figures from the US should put more pressure on the euro, with parity now on the horizon since the short squeeze is out of the way. Set against this backdrop, the continuing failure of Greece to put a meaningful plan together is of less importance, but it will still play a part in the ongoing bear market for the euro.