UK Market Comments

The FTSE has trimmed gains in the afternoon, with its attempt to post a healthy bounce foiled by a directionless start to the final session of the week in the US.

UK markets

After an exhausting week neither the shorters or the perennial optimists are in the mood to drive the market today, reflecting a general lack of trading catalysts this afternoon. After the panic comes the calm, and investors find themselves in a much more reflective mood about the outlook for Portugal than they were 24 hours ago, reassured that Espirito Santo is not about to emulate Samson and pull the eurozone edifice down with it. Miners are on the back foot in London again, hardly a new development, but with a barrage of China data on the wires next week the sector could find a bid in the early part of the week. Imperial Tobacco’s plan to conquer the US has been well-received, but the real hope still lies in emerging markets where the health-conscious habits of the developed world have yet to find full adherence.

US markets

The real start of earnings season is next week and so most US traders have opted to kick their heels in anticipation of bigger news to come. Distance has lessened the impact of the Portugal news, and while the Dow has shed its opening gains the broad feeling is that the US found a much more secure footing over the past two days than its cousins in Europe. Wells Fargo’s results weren’t quite the joyous end to the week some had been expecting, with growth stalling, but traders are content to wait and see if weightier numbers from the global financial titans next week can put markets into a more positive frame of mind.

Commodities

There has been a trimming of gains in gold this afternoon, but the failure to break $1340 once again signals that much of the flight to safety trade has started the weekend early. Fears about Portugal are just the ticket to boost the gold price, but unless and until it spreads to other Portuguese banks or into Spain or Italy then the shelf life of the latest crisis is fairly limited. Crude oil has seen three weeks of declines – but for a change it is fundamentals driving the price decline, not geopolitical speculation. Here traders are on firmer ground, and it’s difficult to see how the price can rebound if the market becomes much more liquid.

FX

The end of the week sees the pound and the euro little changed versus the US dollar. For sterling, the Federal Reserve minutes leave little opportunity to dent the pound’s rally, and with CPI from the UK next week looking to post a strengthening in price growth, the stars are beginning to align for a GBP/USD towards $1.72. The euro needs to hold $1.36 in the coming days, however, if it is not to risk a drop to the June lows around $1.35.