UK Market Comments

The FTSE has seen its gains increase during the afternoon, with US markets opening higher as well following yet more earnings updates.

UK markets

Having breezed back through 6800 today, the level that caused it so much trouble in recent sessions, the FTSE 100 is now seemingly on course for yet another try at 6880. It has been the case again and again that apparently major risks to the equity environment, such as Ukraine, only last for a few days before the fear factor recedes. That appears to be happening again, with the index helped on its way by good updates from serial strong performer Next. Even so, today could mark the high point of the week, with the avalanche of major US figures conspiring to reduce the general appetite for equities. In addition, August and its low-volume purgatory are now on the horizon, raising the risk that gains this week could be transitory at best.

US markets

Today’s move back above 17,000 for the Dow Jones is likely to provoke another outbreak of general unhappiness among those predicting a correction. But with earnings still coming in ahead of expectations the dips are still likely to be brief and shallow. The big news of the day is still to come, with Twitter earnings after the bell. As ever, Twitter lives in Facebook’s shadow. The comparisons are many but the key is monetisation. Facebook seems to have pulled it off, and Twitter needs to do the same to convince the doubters that the platform has the long-term viability needed to justify its valuation.

Commodities

The loss of $1300 in gold underscores how buying pressure has all but disappeared over the course of the week. A stronger dollar is playing its part, as the greenback rallies, but it is the lack of major developments in the Ukraine situation that is really pulling the rug from underneath any attempt at a rally in the gold price. It is a macro-heavy week, but it is hard to see what will drive gold beyond a sudden, surprising, and completely unwarranted decision by Janet Yellen to halt Federal Reserve tapering. In the absence of such a ‘pie in the sky’ move, the likelihood is that we will see more losses in the direction of the 200-day moving average around $1286.

FX

Dollar strength continues to put the rally in cable to the test, but it is still far from clear that the latest dip in GBP/USD is not about to be bought. In an environment where UK data seems to have disappeared, the dollar has the upper hand, but it would be wise not to write off the pound just yet. We may yet see a test of the 100-day moving average, the first such event since early June, but with GBP/USD becoming oversold there is ample room for a bounce.