A slight weakness in the markets this morning after we failed to hold on to the opening levels yesterday.  The FTSE failed to make any headway at all through the 5300/10 resistance and general bouts of profit taking after the big surge of recent sessions dominated proceedings.  The jobs data gave the economic optimists and pessimists ammunition to bolster their respective arguments with the overall percentage falling but with long term unemployed firming up and the numbers of part/short time workers increasing.  As with most pieces of data we can look at this in two lights either employers are bringing in people short term in the hope that they will eventually migrate to permanent as business continues to pick up or they are reacting to the perception that any growth now is likely to be stomped on in the projected Government cut backs and are therefore lightening their liabilities in the event/likelihood of having to lay off staff in the near future.

The Treasury Select committee seems keen on breaking up the banks for some reasons not altogether clear.  The only two real combined UK investment/retail banks before the financial crisis were HSBC and Barclays both of which survived quite nicely thank you very much.  HBOS was undone by poor domestic lending practices and RBS by the acquisition of ABN (i.e. their attempt to become an investment bank at the worst possible moment).  Northern Rock and B&B were solely focussed on one area and this did not exactly help them either.  A proper analysis might conclude that combined banks are actually more stable than more directed units.  Over the pond we saw the same effect but to a certain extent reversed where the combined investment/retail units survived as well but the collapses were in the sole investment arena.

This afternoon sees quite a slew of data from the US and the Bulls will be hoping that the expectations for poor numbers will rebound in the favour of the markets.  Often anticipation drives the market more than the event and we may find that weak numbers have already been discounted in the minds of dealers.  Of course weak numbers would still be just that … weak, and markets are unlikely to continue too much higher without some encouragement from the data.

The FTSE is trading some 20 points lower in early action mainly driven by banks and mining stocks. Much of the recent rally was driven by the mining sector and BP’s rebound but, with the Chinese economic surge slowing slightly, future expectations on returns are taking a slight downward revision.  Between 5175 and 5220 (déjà vu once again) remains the support level to focus on as has been the case at various times over the last 10 months. We seem to have been either above this level trying to go down or below it trying to go up for half of the last year.

The Dow and S&P are also slipping in early action after a sharp spike higher in the futures markets in the wee small hours as China’s GDP numbers came in better than expected, but that hasn’t really spurred on European markets. A volatile session ensued last night after the FOMC minutes revealed the Fed downgrading their growth forecasts for the US, which was not taken well by investors, but the weakness was short lived.

The FOMC minutes not only led to some volatility in indices but have contributed to further weakness for the US dollar.  With the US still keeping the stimulus option very much on the table investors will be wary of exposing themselves too heavily to the greenback.  What used to look like a one way trip for the likes of the euro and sterling now seems to have come to an end with EUR/USD having breached the downward trend line around the 1.2700 area which will be encouraging for any euro bulls and their next target will be 1.3000.

Gold has trod water so far in July oscillating around the 1200 level.  This morning we’re at 1213 with the precious metal benefiting from neither the renewed appetite for risk assets nor the still rather opaque outlook for global growth.

Crude’s advances have also been hampered by the resistance in equities to push higher as seller creep in to play the recent trading range between $70 and $80.  Around $76.80 this morning it’s anyone’s guess as to how the rest of the day will pan out for crude!