UK Market Comments

As the week comes to an end most indices remain defensive in tone, although the FTSE 100 is managing to stay in positive territory ahead of a big week for the index.

UK markets

Friday torpor seems to have descended on the FTSE, with the small gains being made in the knowledge that in a week’s time the UK could find itself in a very different position. A further poll puts the gap between the two camps at just two points, but with the ‘undecideds’ still likely to play a significant role neither side can afford to rest on their laurels. Barclays’ new chairman has been greeted with a 2% bounce in the shares, although Barratt’s post-results bounce is still keeping them at the top of the leaderboard. Next week’s UK data will be viewed in the light of the independence result, but the Bank of England’s minutes on Wednesday and UK unemployment figures will at least give traders a look at the broad fundamentals of the UK economic outlook. The 6800 level has held throughout this week, but the battle to stay above this level is not finished by any means.

US markets

US indices have returned to their downbeat ways this afternoon, leaving the US dollar in command of events. eBay shares were given a lift by reports that Google will take a 40% stake, giving them a strong bounce from the $50 level, but aside from that and US retail sales the week has ended much as it began, with little news. Next week is more promising however, thanks to the FOMC decision on Wednesday, but even then the average reaction in markets over the past four Yellen-led Fed meetings has been a measly +0.1% for the S&P 500 and -0.1% for the Dow. As ever, with central bankers what they don’t say is often more important than what they do.

Commodities

The price slump in commodities is turning from a retreat into a rout, as gold dives through its June lows and pushes into territory not seen since the beginning of the year. The final quarter of the year looks set to be the only one in 2014 that may not be burdened with the possibility of Western conflict with Russia, even if sanctions are here to stay. Faced with this, and a rising demand for US Treasuries and the dollar ahead of a 2015 that should see a Fed rate hike, precious metals should remain under serious pressure.

FX

The lesson of September has been to never discount the US dollar. The currency is looking for its best performance in 17 years, racking up nine successive weeks of gains. The continuation of this will depend on the Fed meeting next week, with some trimming of dollar longs in the run-up to Wednesday’s meeting. Sterling should find it hard to make progress next week when the future of its home nation is at stake. If Scotland votes ‘Yes’ next week, the UK’s constituent parts could be about to embark on a currency union experiment every bit as revolutionary as the political union that began over 300 years ago.