Market Comments

European manufacturing and services PMI figures indicate that the ECB’s QE programme might be improving optimism but not the underlying data.

UK markets

The Royal Mail, another FTSE 100 company that the UK taxpayer has a direct interest in, posted its full-year figures. Luck, due to the demise of competitors, rather than skill appears to have been one of the biggest contributing factors to the market’s relatively warm reception. A continuation of this luck will increase the market’s expectations that the government will look to shed its remaining 30% stake in the company – especially as £1.5 billion would help fill a number of austerity holes. Both National Grid and United Utilities appear to have posted figures impressive enough to appease investor demands, while small enough to provoke the public’s rage. Once again, the banks are back in the firing line. The latest round of regulatory fines following the review of the forex markets has once more been exposed. The markets have become increasingly blasé towards revelations of historic banking misdemeanours and the fines that these create. Only one of the FTSE banks is off by more than 1%, and two thirds of that is due to the fact that it has gone ex-dividend today.

US markets

The release of last night’s US Fed minutes did little to give traders a clear sense of direction, as the policy of Fed chair Janet Yellen of being vague, while stalling for a clearer picture to emerge has left the markets underwhelmed. US equities however have quickly shrugged off the negativity following the Fed chair’s equity overvaluation comments. While everyone continues treading water, it is becoming increasingly clear that the old ‘go away in May’ saying still holds some sway. It had been thought that Europe had the patent on kicking cans down the road, but the US looks to be making a concerted effort to pinch this practice – certainly when it comes to making decisions on interest rate rises.

Commodities

Gold continues to suffer from its inability earlier in the week to close above $1224. It has once again dropped back into the middle of its well-worn range, oscillating around the $1200 level. The fluctuations in the US dollar continue to cause havoc for oil traders, who are already juggling a multitude of supply and demand issues while gauging the direction of oil. Regardless of the current oversupply and limited demand balance, both US light and crude continue to edge higher.

FX

The recent revelations that the ECB has front loaded some of the summer’s QE purchases, due to liquidity fears over the summer, continues to confuse EUR/USD picture. With the start of a two-day ECB monetary policy meeting starting, accompanied by speeches from ECB president, Mario Draghi, could see further head scratching. Some cynical corners of the currency markets are wondering if the frequency and duration of Draghi’s speeches might not be an inverse correlating indicator as to the strength of the eurozone. With Bank of England governor Mark Carney due to speak tomorrow, hopes that GBP/USD can avoid such disruption might be overly optimistic.