Back from a trip to Singapore where the glee in the voices of those we went to meet was hard to miss. The first topic of conversation was invariably the flow of business that they were seeing from the UK and US as more and more activity flees the arbitrary taxation policies of the incumbent administrations.
Hard for us to stomach but there are places outside of Europe where the rule of law and political stability is even more solid than it is here. Singapore’s laws, as are Australia’s, are based on Anglo Saxon principals (and are far more inviolate to the whims of populist politicians). Not only this, but the education system is, far, far in excess of anything (outside the private sector) that we can offer. More and more brokers and investment funds are electing to operate outside of the UK and, at some point, if the level of abuse and punitive taxation is not reduced this will reach a tipping point of self fulfilment. Ignorant people will cry ‘good riddance to bad rubbish’ unmindful of the vast and crucial invisible earnings income that the City brings to the UK. The fact that a few people earn huge sums should be immaterial as they would at least be earning it here, for companies based here ….. therefore paying both corporate and personal taxes into the UK Treasury. But politicians rarely look beyond the next sound-byte or election (witness the appalling state of the UK’s power structure where the inability of the last two governments in taking the unpopular energy decisions has led to an almost crisis situation…. And yes this includes the Tory administration prior to Teflon Tony)
Ah well… once it is lost beyond recall the errors of the last few years will be rued.
Today sees the FTSE bouncing from the 5440/5450 support level in early action. 5450 proved a small barrier for the markets to overcome on the way up and will probably prove harder to penetrate on the way down (if there is a way down that is!). The markets are definitely building much stronger supports than resistances and until there is a concerted attack on equity values this sequence is quite difficult to see being overturned. Support below 5450 is at 5350 to 5375 which is a far harder nut as it proved to be impossible to break all the way through November and much of December. This said, the feeling of impending doom seems oddly difficult to shake off even after one of the best years ever for the equity markets. Inflation is beginning to stir and the BOE may be forced to act on interest rates rather earlier than the overall economy might prefer, on top of this QE must also be in its death throes and unlikely to rise Phoenix like from the ashes and the corresponding rise in long term bond returns will likely cause a similar reaction in the FTSE.
Currency markets seem to be in two minds as to the coinage to follow. The pound has had a small resurgence versus virtually all comers as the Dollar rally of recent weeks has run into problems. The target of parity versus the Euro has drifted away from dealer’s radars as well as the woes over Greece, Portugal and Ireland have dominated news flows. GBP/EUR is now at 1.1350 but there is heavy resistance from 1.1370 up to 1.1460 and we are seeing some heavy selling at these prices.
Cable is looking comfortable at 1.6335 but there is solid resistance bang on this level and up to 1.6360. If we break through here we may see a sharp move higher up to the 1.6470 region. A failure to close above here today may, conversely, be taken poorly and the Sterling Dollar market is littered with the corpses of those carried out expecting continuations of rallies!
Oil continues to react badly to the failure of the rally above $82 to maintain traction. A week or so ago I was commenting on the fact that Oil had managed some nine trading sessions higher in a row. We have now followed this with seven in a row to the downside! And, in Brent, we now sit bang in the middle of the trading range which dominated October through to December ($75 to $80). It is difficult to even call a general momentum as we have now seen a strong attempt to the downside (Early/Mid December) followed by an equally powerful move higher (Late Dec/Early Jan) both coming to grief. Best guess is the cowardly option to specify the self same range (75-80) for the foreseeable.
Gold is acting in much the same way as powerful moves higher seem to run into treacle above $1155 but likewise are unable to batter lower than 1115. The one worry here is that weakness in the dollar, which has proved a boost in the past, has failed to give much of a push in recent days. Support is at 1125/1127 and the aforementioned 1115 and resistance is at 1142 and 1154.