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Market Comment 6th Apr 2011

The FTSE seems to be carrying on regardless even though oil remains firmly above $120 a barrel, but this time it’s metal prices that are driving mining stocks higher and there’s even a little bit of help from the banking sector this morning. 

The FTSE actually opened higher than the current 6025 level so it seems that investors remain content to buy stock with the benchmark above the psychological 6000 level.

Recent weeks have been a struggle for retailers in particular and the market is focusing on high street bellwether Marks & Spencer who released the best news the sector has had for a while (at least it’s not as BAD as everyone had previously thought).  Their fourth quarter sales only dipped by 3.9% when expectations were for a fall of as much as 6% and there were a few glimmers of hope in the numbers.  Clients have been “long and wrong” buying into the share price’s recent weakness but today have been rewarded for their loyalty with a near 5% rebound in the stock.

Contrarian investors might start to be looking at retail stocks which have been beaten up so far this year.  The sector is down some 8% for 2011 and of course at some point the weakness will be overdone.  Yesterday saw Home Retail’s US private equity investor up its stake in the owner of Argos and Homebase which has taken its share price back to pre-profit warning levels of last month, so it would seem that they certainly see things improving for retailers in a few months time.

Things remain tough on the high street and we’re yet to see the real test from the government spending cuts so while the outlook over the medium term is still challenging, as Marks & Spencer themselves mentioned today, in the longer term some of these stocks are looking attractive to investors.

On the economic data front things are a little quieter today with UK industrial and manufacturing data and EU GDP numbers.  The industrial production is expected to show a continued rise and the 2nd release of Q4 GDP for the eurozone is expected to remain unchanged at 0.3%.

The euro has been trending upwards versus the dollar since mid-Feb however, expectations that interest rates will rise sooner than expected caused a short term jump in the dollar yesterday.  Despite this and also Moody’s lowering Portugal’s long term credit rating the euro has rallied to its highest level versus the dollar since November 4th.  The pair has support at 1.4210/190 and resistance at 1.4335/70, however comments by Jean Claude Trichet after the policy meeting will be crucial for its short term direction.            

Sterling has so far had four consecutive positive days of gains against the dollar and is currently trading at 1.6340.  UK data reported that the service industry grew at a faster pace in March which is another case for interest rates being raised.  The pair has support at 1.6220 and resistance at 1.6350 with 1.6400 in sight.  The BOE policy makers are set to have a two day meeting and we could find out a bit more as to whether rates are set to go up. Watch out to see how this affects the pair over the short term.

Deep down we all knew this would happen. Gold has hit another record high and silver has hit a 31 year high on the back of Portugal’s credit rating being cut. Gold is now trading at 1457.6 per ounce and with so many other factors aside from Eurozone sovereign debt, dare we say it could go even higher?  Silver hit it's highest level since 1980 at $39.44 and May futures are slightly up again this morning.

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Market Comment 6th Apr 2011

The FTSE seems to be carrying on regardless even though oil remains firmly above $120 a barrel, but this time it’s metal prices that are driving mining stocks higher and there’s even a little bit of help from the banking sector this morning. 

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