Once again it’s economic data from China that is giving investors a little boost and optimism that the global economy will wade through the sovereign debt crisis and come out the other side relatively unscathed. Despite industrial production slowing a little, retail sales exceeded expectations and the all important inflation measure also came in slightly higher.
The big emerging economies, in particular China, are expected to keep global growth on a positive footing. But inflation remains a concern as the People’s Bank of China may have to take more radical action than just asking banks to reign in lending, which means raising interest rates.
China continues to be the driving force of global growth and so any positive numbers from them will be good for the equity market. The headlines over the past few weeks have been so gloomy that it’s about time we had something positive to right about.
The same cannot really be said for BP, who continue to get bashed by the US. David Cameron, who has tried to keep the situation at arm’s length, has now entered the ring in. With the US trying to throw everything at BP from not only the cost of the clear up, but the costs incurred by any other firms from ban on drilling, sentiment towards the stock is at an all time low. This morning at least there is a bit of a bear squeeze on the stock and it’s 6% higher, just below the £4 mark. News that this oil spill might even bring the company down hasn’t helped the share price over the last few days, so it’s no wonder Tony Hayward has said he may concede to critics and suspend or even cancel the dividend. For the stock to recover there needs to be a severe shift in rhetoric and fortunes of the company which at this point in time looks highly unlikely.
So the FTSE seems to be benefitting from a bit of “World Cup” momentum this morning, eking out a meagre gain and sitting on the 5150 level. The rise from support levels has once again given investors a nice warm feeling inside, but even if we do make a bit of ground from these levels, even the most bullish of bulls can’t foresee us taking out the highs around 5800 anytime soon. The hurdles ahead of then are 5330 and then 5530, but for the shorter-term resistance it is at 5175 and then 5265.
The week ends with a bit of economic data, in the form of retails sales and University of Michigan confidence from the US. Retail sales should come in relatively healthily and the Michigan confidence number is also expected to improve with lower petrol prices in the US helping.
FX markets also seem to be quiet on this World Cup day. The euro and sterling had good days against the dollar yesterday, with bear squeezes lifting the euro above 1.2100 and cable above 1.4650. This morning cable is giving back some of its gains, having rejected resistance around 1.4750 earlier this morning and this could prove a hurdle over the near-term. A break above here should open the way for 1.4815 but to the downside the bears will be targeting 1.4600.
For EUR/USD 1.2150 and then 1.2210 are key resistance levels, but that looks like a tall order for bulls as sellers will be eying up the lower upward trend line at 1.2000.
Gold’s double top around the 1250 has lead to declines back to the 1220 area. This gradual grind lower has been on relatively thin volumes as bulls seem happy to just take a bit of profit at the levels and hope for a bit more of a pull-back before piling back in. A run down to 1200 can’t be ruled out and to the upside 1250 will remain challenging.
$76 has proved too much for crude, which is being helped by the suspension of drilling in the Gulf of Mexico. Now around 74.50 bulls might look to pick up some more crude on this little pull back, with an aim to test 76 again and then 77.75.