The broad recovery in risky assets continued into yet another day, providing a positive end to the first quarter of the year. A drop in unemployment claims and a fairly upbeat set of US manufacturing data also provided a useful boost for optimism and risk appetite.
It is hardly surprising that the rally in equities has lost some of its momentum, given the recent rebound. While it might be tempting fate, it seems that market sentiment in general has recovered from the multiple shocks of Japan, the Middle East and Europe, paving way for the bull market to push higher once more. That is not to say that there are no clouds on the horizon, but the market has had the cold bath that it needed and now seems prepared to push forward in the medium to long term.
At this juncture the market is anxious to see whether the FTSE can breach and maintain a foothold above the psychologically important 6000 level.
US economic data
Initial jobless claims fell by 6000 to 388,000 last week, giving further indications of an improvement in the labour market. The federal government also issued its annual revisions to the seasonal-adjustment factors, which caused an upward revision of the previous week's figures to 394,000. Continuing claims declined by 51,000 to 3.71 million, giving additional hope that the recovery in the US labour market is finally gaining traction.
In the first of a trio of releases pertaining to the US manufacturing sector, the Chicago Purchasing Managers Index fell back to 70.6 in March from the 23-year high of 71.2 touched in February. The fall was less than expected, and suggests that US manufacturing remains buoyant. An index of activity maintained by the Institute of Supply Management – Milwaukee rose to 66 in March from 63, while factory orders in February fell 0.1%, from a January increase of 3.3%, having been expected to rise 0.5%. The overall picture is one of strength in American factories, which have consistently been at the forefront of the economic recovery.
US equities – Berkshire Hathaway, Microsoft
By 3.40pm (London time), the Dow Jones was 27 points (0.22%) higher at 12,377.52, and the S&P 500 had advanced 1.21 points (0.09%) to 1329.47. The Nasdaq 100 gained 3.32 points (0.14%) to 2339.84.
Warren Buffett's Berkshire Hathaway fell after news that David Sokol, widely tipped as one of the Sage of Omaha's successors, had resigned following dealings in Lubrizol shares. Lubrizol was acquired by Berkshire two weeks ago, and Mr Sokol said that he invested in the company as an attractive opportunity. The Securities & Exchange Commission has begun an investigation into the purchases, although Mr Buffett himself has said that he sees no wrongdoing in his lieutenant's actions. Berkshire shares fell 1.7% (or $2,113!) to $125,990.
Microsoft has escalated its conflict with Google by filing a formal complaint to regulators in the EU, claiming that the search engine is restricting competition. Microsoft is the largest firm to complain about Google, and says that smaller firms have urged it to share its knowledge of the market with officials from the EU's competition authorities. Microsoft shares were 0.3% lower at $25.53.
FTSE afternoon session – Mothercare, Compass, Falkland Oil & Gas
After languishing in the red around lunchtime, the FTSE 100 managed to move back into positive territory, and was up 0.3% at 5964 by 3.40pm (London time).
Babycare retailer Mothercare slumped 9% to 401.4p after it reported a squeeze in sales for the three months to 26 March. Although total sales were up 10.2%, sales in Britain were down 2.4% like-for-like, with gross margins down 0.5 percentage points to 2.5%. The company expects the UK trading environment to remain difficult, but predicts continued strong growth in its Asia-Pacific business.
Compass, the contract caterer, reiterated its full-year forecasts, having enjoyed a good first half's trading. Organic growth in the first six months of its financial year was 5.5%, with an additional improvement in margins. The firm added that the new business pipeline remained encouraging. Compass shares edged back 0.2% to 558p.
Falkland Oil & Gas soared 16.5% to 92p following news that BHP Billiton would be transferring its 51% interest in licences to the north of the Falkland Islands. Although BHP retains an option that would give it an interest in any discovery, the news gives Falkland substantial new areas for exploration.
Commodities remain strong
Commodities enjoyed strong advances during the afternoon session. Gold prices briefly surpassed the $1440 per ounce mark once more, while the rising silver price touched $38 per ounce. Cotton prices once again moved towards $200 per ounce, as news emerged that China was contemplating stockpiling the fluffy white commodity in order to encourage output. Beijing will establish a reserve that would last from September 2011 to March 2012, covering the autumn growing season.
