Markets appear sanguine as the great and the good get round a table once again to ‘save the world’. No doubt saving the world will mean eerrr…. ummm… spending lots more money. It is funny how politicians nearly always come up with this solution.
The FTSE has moved up to the resistance level mentioned in previous comments of 5180/5200 and our clients are getting quite pleased with the solidity of this level as we have now hit it several times and retraced rather satisfactorily for the day traders. Support is at 5100 to 5120 giving a reasonable range for possible revenue opportunity.
A break to the upside would move us back into the 5200 to 5375 range which dominated the later quarter of 2009.
Travelport pulled their float which must come as something of a disappointment to the IPO fraternity and demonstrates the continued nervousness over new issues. The recent big floats in the Far East have been rather disastrous and investors are now demanding discounts to which issuers are unwilling (naturally) to agree. Travelport have a hefty debt to bear and with rates being squeezed as QE ends and Southern Europe’s woes the loss of this opportunity to pay down some of the money may make a renewed attempt a very distant prospect.
Sterling is becoming a bit of a worry again as even the recent reversal in the Euro weakness has failed to pull the currency off the recent lows. Cable is still pressuring at the mid 1.55’s and a break and close below 1.5570 may well be a trigger for a bigger sell off. Naturally while this level holds the prospects for a bounce are still in place but buyers should beware an aforementioned break lower.
The equity markets are in something of a quandary as, whatever happens to over currencies and the sovereign debt issues; these may only have a marginal effect on what are now mainly multi-national corporations. We may once again be focussing on corporate debt exposure as investment cash becomes an ever scarcer commodity in the face of increasing demands from the public sector. Borrowing costs will probably increase even if the base rates remain low.
Gold remained below the resistance levels mentioned yesterday at 1082 (just) both in yesterday’s session and this morning dealers seem happy to play this level as they are in the indices selling whenever we approach 1080/82 and taking small profits on any pull back.
Oil has now returned to OPEC’s favoured $75 level once again and comments in the press today about the inevitability of prices going ever higher in the future seems to have struck a chord with our clients and they have been buying throughout the recent move higher. We are in a sort of no-mans land on Oil prices at the moment at the 75-76 dollar level in the recent (last four months) this level has generally only been seen when we are on the way somewhere else (either up or down) at the moment we are of course rallying so it is tempting to go with the flow.
In general all the asset classes are looking comfortable at current levels and it will probably take some piece of exceptional news to break us out of the ranges which have dominated the last week. Yesterday there was a sense of doom rolling over the markets but the last 24 hours seems to have dissipated this to some extent and we can expect a continuation of this oscillation between fear and greed.