Difficult to call the markets this morning, everything is very much unchanged on the Friday close outs and dealers seem to be in two minds as to future prospects.

While the headlines last week were all about ‘new highs’ etc, etc it must be pointed out that in very early action the FTSE and Dax are now back below the intraday highs of mid September. The US’s Dow and S&P are still above the mark but not particularly convincingly. The major bright spot at current levels is that corporate profitability has proved to be much better than expected (aside from CitiGroup and BOA) and with rates likely to stay low (at least lower than in my lifetime) returns from equities continue to look very attractive in comparison to other asset classes.

Virtually no numbers due out today either side of the water means that any impulse on the trading sessions will be sentiment driven rather than factual. It has to be pointed out that, in general, days with little information follow the current trend and I do not need to point out which direction that is.

Apple do report but this is only after the close tonight so we might get a bit of a boost/bash after 21.30. Tomorrow sees quite a bit of reasonably informative data with UK money supply numbers (one of the bits of information that we are worried about) and both the US and German PPI data. These will go hand in hand with an enormous number of big US corporate releases. So we might have to wait 24 hours for any real excitement.

Currency markets are steadying up after the Sterling bounce of last week with the Cable rate having bounced from a low of almost 1.57 to the current 1.6306-1.6308. The headlines marking the pound out for parity with the Euro also had to be put on hold for a while longer as the cross rallied some 350 pips from 1.0625 to almost 1.10. We are giving up some of this in early trade as the Euro continues to hold steady near the highs versus the dollar and the cross is now at 1.0937-1.0941. Sterling really smashed into the weak shorts who had been attempting to catch a free ride on the fall but the inability to break above 1.1015 (the support/resistance from mid and late Sept) will be worrying some. The Pound can be said to be weak with the occasional sharp rally the only thing making it look good at the moment is the fact that the dollar is proving to be just as problematic.

In Friday the Euro failed versus the dollar at the exactly same level (1.4966) as mentioned in Thursday’s comment and clients were quick to take advantage selling down into the pull back (which obligingly enough petered out at the same level as on Thursday as well!). This morning we have already seen an attempt at the downside in very early trade in Asian trading running out of steam down at 1.4825 and there has been continued buying ever since taking the cross back up above 1.49 as I write. It does not take a genius to say that there is good resistance up at 1.4966 (!) and support at around 1.4840. There is minor resistance at 1.4920 as well but a close above or below the big numbers mentioned would possibly set the short to medium term tone.

Our comments concerning the continued strength in Oil all through last week made little impact on most of our clients who continued to sell heavily all the way up. We open this morning at around 79 bucks having defeated a whole series of resistance levels. As mentioned last week there are not much in the way of historical trading barriers above 77 dollars until we get to $85 and the fear is that even this might be cautious. $90 has a rather nasty look to it. For the bears there is always the hope that moves in one direction or the other seldom make the shift without some reversals along the way and Oil has now had seven positive sessions in a row and even when the black stuff was roaring up to 147 dollars it never managed to match this when combined with a ten dollar move (there was a nine day rally in Aug 07 when oil moved up 6 bucks from 71 to 77).

Gold is being quite frisky at the current levels putting in some decent trading ranges whilst actually closing in quite a tight range. There seem to be happy sellers above 1060 and just as comfortable buyers in the low 1040’s. With the Dollar continuing to look fragile, inflation fears still prevalent, interest rates somnolent and general financial fears ten a’penny the Yellow metal retains its allure. It is difficult to see a great change in any of these scenarios either which makes a big sell off difficult to see. The one area that might be worthe watching is the greenback as, with the world and his dog dollar negative, there is a chance of a bit of buying pressure. If the dollar rallies Gold will look vulnerable. At the moment this does not seem too likely but, as mentioned, an eye should be kept out.