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Market Comment 16th Mar 2012

US markets continue their climb with the S&P hitting its highest level in almost four years.

Yet European indices and certainly in the case of the FTSE, still don’t seem to be following their lead.  The London market is lagging behind its counterparts stubbornly refusing to break through resistance and still the 6000 level remains elusive.  Investors have been given a little bit of a reality check as mining stocks struggle to make any significant gains on the back of the warnings surrounding the Chinese economy and these are the real growth story shares, the heavyweights that have been behind much of the rally thus far.  Since the FTSE has a large chunk of miners in it, the index is heavily reliant upon them.

The market has literally gone sideways this week and some of the thin volume could be contributed to it being Cheltenham week.  Today is Gold Cup day at the race festival and so it’s unlikely that we’ll see volumes pick up and there is not a huge amount to write home about when it comes to economic data releases.  But there is the release of US consumer prices at lunchtime and then we end the week with Michigan confidence figures.  Since the rally is being purely driven by the Dow and S&P the bulls are expecting them to carry on higher.

The German Dax does seem to be making best attempts to follow the US indices higher as it is now firmly above the 7000 level at 7150 this morning.  For the FTSE we’re flat to slightly lower on the open at 5940 and as mentioned if it wasn’t for the mining sector just keeping the index in check, we would probably be sailing above 6000.

In the absence of any major market moving news and with many people off at the races, the headlines are filled with an ex-Goldman banker’s revelations about the firm’s business practices and treatment of its clients.  In this day and age of banker bashing this is going to do little for the banking sector to ingratiate itself with an ever critical public.  As mentioned in this comment before investment banking is going through a big overhaul including mass redundancies.  It is not hugely surprising to see one of these people mention something about their take on the working environment in some parts of the industry, but this is not a time where such bad PR is going to do much help.

Currency markets are rather flat this morning and for now the single currency is still managing to hold onto the 1.3000 level against the dollar.  There still seems to be a slight shift towards the dollar at the moment although this morning the greenback bulls are just taking a breather.  EUR/USD is at 1.3080 at the time of writing so traders will be focusing on support and resistance seen at 1.3000, 1.2970 to the downside and 1.3120, 1.3155 to the upside.

For USD/JPY which has seen impressive gains in the last few weeks a big top looks to have formed in early trade yesterday around the 84.00 level.  At the time of writing USD/JPY is at 83.50 and near term support and resistance is seen at 83.15, 82.80, 82.60 and 83.85, 84.20 respectively.

Gold seems to have found some support around the 1640 level and is at 1655 this morning.  Considering how much geopolitical tension is built into the price of oil it is a surprise to see this hasn’t translated into strength for the yellow brick.  The real worry for the bulls is that the recent recovery of the dollar has been signalling a possible end to the amazing rally in gold over the past decade or so.  Many bulls still believe this is merely a blip as part of the next big move higher, but that can only really come if the Fed becomes more bearish and gives greater hints that QE3 is on the way.

Brent continues to hover near its highs and is at 123.20.  As mentioned the price is still loaded with geopolitical tension and consumers and businesses are wishing that these tensions are eradicated, which if they are could see the black stuff decline sharply.  With prices at the pump creeping ever higher the squeeze for motorists is becoming a real problem and will affect the wider economy if it continues.

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Market Comment 16th Mar 2012

US markets continue their climb with the S&P hitting its highest level in almost four years.

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