UK Market Comments

Ahead of Federal Reserve minutes this evening, US markets are notching up small gains, while the FTSE continues to labour in the red.

UK markets

Insurers have conspired to keep the FTSE down today, after Admiral dived 6.7% and took the rest of the sector with it. The trading update this morning rather scuppered the rally in the share price, which had until yesterday stood at three-year highs. Evidently the company has aimed at getting the bad news out of the way, and the sound of earnings revisions could be heard across the City today, but Admiral will need to plot a steady course now to avoid taking on more water. Aviva disappointed too, after its new targets were deemed insufficiently ambitious, an odd fate for a company whose previous hubris was widely derided.

US markets

US markets steadied the ship this afternoon after two steep days of declines, but all this is made in the face of Fed minutes that could easily upset the delicate balance. At least Alcoa has done well, getting earnings season off to an impressive start. Its shareholders should continue to thank the Dow Jones for booting their company out of the index, as Alcoa shares have gained over 40% this year, versus a miserly 2.2% for the Dow. Once again the Dow is keeping a healthy distance between itself and the 20-day moving average – at present it seems that the louder the calls for a correction become, the smaller the dips get.

Commodities

The breakdown in oil prices has seen both Brent and NYMEX shed almost all their June gains, as Libyan supplies come back onto the market and remove yet another of the props that supported the price during its summer rally. Seasonality issues may help to lift the commodity in the short term, as the summer holiday gets underway in the US, but unless the level of tension in Iraq is ratcheted up several notches there seems little to lift oil from its current doldrums. Brent’s target is now $108, while NYMEX is fighting for its 100-day moving average at $102.40.

FX

EUR/USD is doing its best to shrug off the ‘death cross’ witnessed at the end of last week, as it continues to find buyers around $1.3640, but these gains are being made with a nervous eye on the Fed minutes this evening. Any hawkish tone here could see the euro gains evaporate rapidly and signal a new attempt to head towards $1.35. Meanwhile the pound is little changed versus the dollar, but even a surprise set of minutes would likely only see it slip back towards $1.70, as it deals with the weaker UK economic data seen yesterday.