UK Market Comments

With a ‘morning after the night before’ feeling, the FTSE is trying to hold onto some decorum and has at least started in the green, but will no doubt be nowhere near this level once this has gone to print. After an hours trade we are a scrap higher around 6220. With the ‘10% from the high’ level around 6210, this has been a key point of resistance in both today’s and yesterday’s sessions. We have been lower out of hours after the US markets bottomed out following the European close; with the S&P around 3% lower taking European futures with them. Not since perhaps the summer of 2011 has a spike in volatility rattled investors so much, and the breadth of asset classes that are affected is leaving little stone unturned. The moves in major government bond markets yesterday were nothing short of spectacular, with a flight to safety prevalent. US 10-year yields, currently around 2.05%, managed to go from 2.20% to almost 1.85% and back to 2.15%. There will have been some very weary traders in Chicago last night. 

Shire (-8%) has added to yesterday’s fall as Abbvie confirmed its worries over the deal, highlighting changes to US tax rules as the major stumbling point. The issue of tax inversions has been a prominent political sticking point in the States recently, and this is certainly the highest profile deal to be affected. Netflix gave us the first major drama of this quarter’s earnings season, plummeting 25% after the close last night as it missed growth forecasts and highlighted price increases as being partly responsible. Bad results are clearly going to be punished in this market, and high valuation growth names are likely to see any selling over amplified as investors seek stability.

With a small portion of European trade out of the way, US markets are pointing lower. With the S&P opening call around 1855 (-7) and the Dow around 16,100 (-40). Pre-market we have numbers from Delta Airlines, Dow components UnitedHealth and Goldman Sachs, with AMD and Google after the close. With European inflation data this morning and some Fed speakers this afternoon, we have another busy day in store.