As the final trading session of the quarter gets underway, for many it’ll be a quarter they would rather forget.
The re-emergence of the eurozone debt crisis got us off to a shaky start but didn’t deter investors from pushing onto new highs, in particular there was extravagant strength from US and many European markets namely the Dax and the Cac. Then the unrest in MENA really started to unfold properly and oil prices spiked just before the terrible disaster in Japan caused the frantic sell off at the beginning of March. Let us not forget the shock decline in UK growth for the final quarter of 2010, which really was unexpected. So far, 2011 has hardly been short of events that have affected the financial markets and you get the feeling that there’s more to come around the corner. It looks like the FTSE will end Q1 flat to slightly higher, but for those longer term investors the dividends would have made that gain a little better.
The recovery by equity markets to this point has certainly been impressive and indicates that there’s still quite a great deal of underlying bullishness amongst investors. Yesterday’s comment was a little gloomy but today things seem to have perked up just a little following some decent economic numbers that contradicted some of the individual corporate data. The US’s private ADP payroll number was an encouraging prelude to tomorrow’s non-farm payroll and the UK’s CBI reported some very encouraging news in relation to our services sector. The rebound from the harsh winter that sent our economy back into reverse has been strong and points to an expansion of growth in Q1, in other words no double dip.
The FTSE’s strong rebound just seems to be finding it a little hard to take on the 6000 level. The hourly chart of the last few of weeks resembles a stair case. Sideways for a couple of days then a sharp rise, sideways for a couple of days then a sharp rise, so momentum is seemingly in the bulls favour but the retesting of resistance represents quite a major challenge. A failure to take out this year’s highs around 6000/100 will get the hackles of the bears up.
At the time of writing the FTSE is completely flat at 5950 having been a little higher on the open. Today is all about the results of the Irish bank stress tests as there is little in the way of other economic data apart from the weekly jobless claims from the US and then a Chicago PMI number later.
Just when you thought the dollar was fighting back, sterling surges after the better than expected CBI service index figures for January and an unexpected increase in house prices for March. The CBI number increased by 1.3% from December and the services sector makes up more than three quarters of total UK GDP, hence the boost for the pound. The relative strength index for the pair is in a rising uptrend so we might see a test of resistance found at 1.6200.
The euro ended flat on the day versus the dollar which suggests a bit of caution ahead of NFP figures tomorrow. The pair has been trading pretty much sideways all week and it may be not be until tomorrow that we see a proper move from either side. The pair has support at yesterday’s low of 1.4049 and finds resistance at yesterday’s high of 1.4150.
Here’s a fact for you; although gold has been down for most of the week, it is nearing its tenth straight quarterly rise since 1979. After Libyan rebels fell back against their opposition and their Foreign Minister cut his ties with Gaddafi, it seems the already volatile situation may not be getting better just yet. Investors were back into safe haven territory pushing gold higher and it is currently trading at 1427.9. Key levels to watch are 1430 and 1435 to the upside with support seen around 1412 and 1405.
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