UK Market Comments

Heading into the close the FTSE 100 remains flat, as the benefits of being surrounded by buoyant equity markets have been countered by the Tesco-led food retail selloff.

UK markets

Having seen 7 points taken out of the index due to companies going ex-dividend today, the FTSE started the day on the back foot. Tesco’s belated quarterly figures have been met with cynicism as traders speculate that the now £263 million cost of bookkeeping errors could easily be a number surpassed in the weeks ahead. Tesco CEO Dave Lewis has battled the reputational damage with a plethora of promises that the food retailer will do well to meet. The almost 8% fall in the company’s shares has seen both competing food retailers and producers fall along with it, although at a slightly more sedate rate. Market expectations of job cuts at Lloyds have increased in the run-up to this weekend’s latest bank stress test and the release of next week’s quarterly figures.

US markets

Caterpillar has given some tangible credence to the notion that the US recovery is still on track with its better-than-expected figures and improving outlook. Of the major US companies to have reported so far, over 70% have beaten market expectations and US traders will be hoping for more of the same as they wait for both Amazon and Microsoft to post after today's close. Slightly denting the good corporate picture being created in the US have been today's US economic data releases. Rising unemployment claims along with weaker-than-expected flash manufacturing figures have only slightly taken the shine off rises in all three of the major US equity indices.

Commodities

Reports have suggested that Saudi Arabia has already begun to reduce its output to the market and that has gone some way to helping crude oil finally find some support around the $85/barrel level. As we are less than two weeks away from the latest OPEC meeting, rumours and counter rumours are likely to appear over the coming days. By contrast, natural gas prices continue to collapse and have seen prices move into heavily oversold territory.

FX

Improvements in both today’s manufacturing and services PMI figures for the eurozone have merely stemmed the negative sentiment that has been building against the euro. EUR/USD once again looks to be heading back down below the $1.26 level as looming moving averages continue to cap any moves higher. Momentum has once again been lost in GBP/USD, as the prospect of trading above $1.62 looks to have reawakened sterling’s issues with vertigo.