Markets cautious ahead of ECB

Heading into the close the FTSE 100 is 60 points higher, boosted by the LSE news, while equity markets more generally are in solid, but cautious, form ahead of the ECB meeting tomorrow.

A growing sense of caution pervades markets ahead of the ECB decision tomorrow, but the gains in indices have nonetheless been widespread, if a little limited. This feels like the calm before the storm, since tomorrow is sure to provoke volatility; an ECB cut is now a certainty, which would set markets up nicely for a dovish Fed the following week, but it is debateable how long any post-ECB bounce will last. Volatility traders are firmly divided on what comes next, with VIX poised mid-way between the highs of last month and the calm of the first months of the year. A slightly more hawkish-than-expected ECB could, almost on cue, deliver traders the usual late September volatility that they  have been expecting.

It is M&A time in UK markets it seems. First we had Galliford Try yesterday and now the much bigger news of the Hong Kong exchange’s move on the LSE. Unfortunately for many Brexiteers, the kind of freewheeling global capitalism they crave is likely to produce more such foreign swoops on UK firms, given the weakness of sterling. If the takeover is successful, which is far from certain, it would mark the departure of one of the best performing shares on the FTSE, reducing yet further the pool of companies managing to successfully navigate the post-referendum world.