UK Market Comments

The busy corporate calendar and a good reading on UK GDP has allowed the FTSE 100 to distance itself from the more severe selling taking place in Europe and the US.

UK markets

It’s been the banks that have really helped to stem the selling in the FTSE, led of course by RBS, which has confounded the doubters with an impressive rise in profits. At last partial privatisation becomes more than just a distant pipe dream, although the bank will need to follow up with a lot more good news in coming months to confirm the idea that the bank is back in business. In this sense it is prudent that management are still keen to stress the difficulties ahead, lest the bad news gets forgotten. The other company to keep a watch on is Anglo American, which seems set on shaking itself out of a long term downtrend. After dropping by around two-thirds, it seems the market thinks the

company is now more of a better bet. Coupled with a rise in BHP Billiton shares above the major £20 resistance level, the sun might finally be rising on the London mining sector.

US markets

Amazon and Visa are weighing on US indices this afternoon, with the latter forming 8% of the Dow Jones and leaving it looking very unhappy as the week winds down. But Dow investors will be sanguine about this, especially after the impact of results yesterday lifted the index. It is to the S&P 500 we look for a more sober assessment, and yet again the selling here is modest at best. Earnings continue to be broadly ahead of expectations, leaving US markets still poised for further gains as the month end looms. Next week is vital for US economic data, with the Federal Reserve and non-farms both on the list. If the data can reinforce the good impression given by earnings season so far, the

rosy outlook seems justified. Certainly, the bounce in durable goods sets the tone nicely, and the Fed is not expected to spoil the party with any careless words.

Commodities

Oil of both the Brent and NYMEX variety is under heavy pressure this afternoon, dropping through key support at $107 and $102 respectively. The selling has resumed as it appears key supplies of gasoline and distillates are on the rise, removing supply concerns. In addition, the geopolitical crises afflicting various regions have not had any real lasting effect on sentiment in oil. Weeks have gone by and oil supplies have been relatively unaffected. Traders have learnt to take the news more in their stride, and with a calmer approach there could be further downside on the way.

FX

Markets have taken the drop through $1.35 for EUR/USD as the green light to sell more of the currency pair, with German IFO being a useful catalyst for those seeking a rationale. Consumer price index, manufacturing and unemployment data are on the calendar for next week, and will provide crucial newsflow to determine whether the euro can stage a rally against the US dollar. If it fails to rally, then the drop through the key 50-week moving average would continue to argue for a retest of the November 2013 levels around $1.3340.