Heading into the close, the FTSE 100 is ten points higher, while other markets try to rally from the lows.
- Tuesday recovery has uncomfortable echoes
- US CPI the make-or-break figure
- FTSE performance aided by mining strength
Bulls hoping for a sustained rebound today will have painful memories of last week, when ‘Turnaround Tuesday’ was replaced by ‘Washout Wednesday’. While markets are holding their ground today, there is ample evidence that real liquidity is still in short-supply, leaving equities vulnerable to a rug-pull similar to what they experienced last week. The recent sell-off came as a deep trauma for a market almost hypnotised by the slow, steady grind higher, and such a shock to the system takes a while to be processed. We are still in the midst of that now, and a relapse into another selling spasm is all too possible. We wait now for the US CPI reading, which has taken on a new significance as the
data point that will either confirm or allay fears about the strength of inflation.
The dollar bounce seems done and dusted, having barely been with us a week (although again tomorrow’s CPI could breathe life back into it). Mining stocks have been boosted by the rise in commodity prices attendant on the weaker greenback, which helps to account for the FTSE 100’s outperformance today despite the stronger core CPI reading for the UK. Higher growth, thus higher commodity prices, should mean that the sector remains a major destination of fund flows.
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