The actions taken over the week end still don’t go anywhere to put an end to the uncertainty and answer all the unanswered questions.
In fact they may even embolden Gaddafi who remains defiant despite mounting pressure on him to go. Just put yourself in his shoes for one second. You’ve been leading the country for more than four decades, enjoyed immunity and wealth greater than 99% of the rest of the globe, been pretty much able to do what you like and within a few days you are faced with the prospect of all that being taken away and being trialled either in a domestic court of law or international court of law which might see you hanged. Of course there’s no condoning what Gaddafi has done during his tenure, but with all this playing on his mind the markets fear that it might trigger a final mad act as his regime crumbles.
So the markets are on the back foot this morning after an impressive end to the week on Friday. The FTSE is giving up some 25 points at the time of writing to around the 5975 area, a move lower without any assistance from higher oil prices, which are flat so far this morning. Investors remain nervous about the possibility of contagion as unrest in Yemen continued over the week end and the President there remains steadfast in holding onto power. For now the demonstrations are peaceful, however we’ve seen how things can quickly get out of control so for now traders are keeping their hands relatively close to the sell button.
Corporate news will come out thick and fast this week as the European earnings season continues. Despite headlines that would suggest a share price that should be soaring (they focus on the profit figure and of course, bonuses to be paid out), HSBC is dragging the banking sector some 2% lower after it missed estimates and announced that the investment banking division was largely to blame. The stock is one of the biggest fallers today falling back below £7 as the prospect of any increase in dividend is swiftly rebuffed.
Over the near term support to the downside for the FTSE is 5940 and then more medium term support is the 5800 level. We bounced from just above here last week, but a break below could open up the index to as low as 5525. To the upside there’s not much studying of the chart required to see that 6050 and 6100 are the upside resistance levels.
There’s a mass of economic data released today and already we’ve seen most from Japan with retail sales and industrial production data being quite mixed and then later there spending and income from the US followed by the Chicago PMI. So nothing from the UK but throughout the week there’s a smattering of PMI numbers to focus on.
Currency markets are seeing a renewed bout of dollar weakness as the euro climbs back above 1.3800 against the green back this morning. At the time of writing we’re at 1.3815 so bulls will now have their eye on 1.3840 and 1.3875 beyond here. To the downside 1.3715 and 1.3645 are areas that should provide some support.
Cable has also seen a jump higher in early trade. The bulls seem to really want to give the 1.6250 area another test as the sharp gains this morning would indicate the bulls are in the ascendency. To the upside 1.6200 and 1.6250 are the levels of resistance meanwhile 1.6065 and 1.6025 might provide some support.
Gold jumped back above 1410 over the week end and is hovering around there this morning. The bulls seem to be waiting for the next bad bit of news before attempting to push beyond the record highs so things seem evenly balanced this morning.
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