Markets continue to grind higher although the US seemed to have second thoughts after the European close last night, as the Dow made a spirited attempt at leaping to 11000; just running out of steam at 10960(ish).
The close on the FTSE at 5730 is the highest for 21 months, but it is a moot point as to how much of the rally has been inspired by the weakness in Sterling, as so much of the FTSE 350’s business is non-UK based and therefore translates into higher profits on no real increase in revenue. From a foreign perspective, the price of UK stock looks attractive, but investors may well be wary of companies that have a mainly UK focused business model, as the coming years may be grim indeed.
There is not much to go on this morning, and this afternoon sees just the US GDP revision and the Michigan confidence survey, which are both expected to show little change on previous numbers, so we may find that the end of the week session is a tad dull after the excitement of the rest of the week. With the end of the first quarter looming, added to the fact that the Easter break occupies the first few sessions of April, traders will be looking at flattening books and sitting back to survey the scene. The first qtr has been interesting in that we started strong, ran into a sell off and then recouped the loss and more over the next few months. Profits are there for the short/medium term investors to pocket and with a problematical election to negotiate up to May, the temptation to hunker down and await events will probably prove irresistible to many.
Not only this, but the political parties will be making populist appeals to ‘the masses’ over the next six weeks and these are very likely to be of the ‘Capitalist unfriendly’ variety. We can expect more attacks on the City and promises to make ‘the bankers’ pay …blah, blah, blah… While much of this will be merely rhetoric, it would be interesting to know how much more the international banking fraternity can take of it.
The FTSE is opening at around 5710 this morning, off some 20 pips from a strong close. There will be support from 5690 to 5700 against any sell off and below here at 5640/50. On the upside dealers will be eyeing yesterday’s high of 5740 as an obvious target, but in truth it looks as though today is not starting out with aggression (either bearish or bullish) in mind.
Currency markets continued to be dollar favourable yesterday, but this morning has seen something of a pull back as the Euro has recouped some losses overnight. Clients have tried to stand in the way of the dollar rise over the last few days and have been rather steamrollered in the attempt but today may (!?) give a bit of breathing space.
Cable seems to have a bit of support around 1.4800/1.4810, but sellers still have the upper hand and it would be a brave man who stands too aggressively in the way of the Sterling bears. The currency seems to be heading into an almost perfect storm of problems, which (although already all well reported on) do not seem to have any serious solution to in sight. Sterling managed a small rally in the wee small hours last night, but this morning has well and truly been pounded into submission with the GBP/EUR cross dropping almost a cent. The cross is at 1.1087-1.1091 at the moment and there is some support at the 1.1075 level, which may attract some buying but one does get the feeling that the sellers need little encouragement to ‘have another go’ at any moment.
Both Oil and Gold continue to give encouragement to both sides in each session, as they wing about in their current ranges. Gold continues to find buyers below 1090/92, with strong support building at 1087, and Oil likewise is finding it difficult to break below $79/80 for the May Nymex contract. On the other hand, sellers are quick to come to the fore on any rallies as well and prudent range trading appears to be the game to play for the moment.