Markets down as fears of US stalemate rise
CHICAGO (Oct 8) Heading into the close the FTSE 100 is down 70 points, having shown little interest in reversing the negative trend through the day, writes Alastair McCaig, Market Analyst, IG.
US political bickering has hung over the markets like choking smog, limiting traders’ ability to see blue sky, let alone silver linings. If progress is not made soon it’s likely that markets will begin to act more directly to the lingering fears and some aggressive down days could be on the cards.
The FTSE, along with its European counterparts, has fallen further as a result of the increasing fear factor that US politicians will continue to put self-interest ahead of the well-being of the nation, ensuring that a grey cloud has remained over equity markets.
True to trend, French trade balance figures released today were a little worse-than-expected, while Germany’s were a little better, and fortunately for the EU the net effect is a positive one. Corporate news has been thin on the ground and with limited figures to digest, trading floors have had a worrying calm about them.
Increased awareness of Royal Mail’s IPO and the IG grey market had seen the anticipated price rise to £4, and it is only at these levels that we have finally seen a little bit of profit-taking occur. Marks & Spencer have spent most of the day hovering around the top five list of FTSE losers as a number of institutional analysts reassess its price targets. Ocado, on the other hand, have felt the full benefits of a Goldman Sachs upgrade and look set to close the day up over 5%.
Very much like a stuck record traders have been forced to focus on the ongoing political squabbles of the Republicans and Democrats, as they continue to bicker and do little to resolve the issue. The International Monetary Fund has stepped into this debate by warning of the consequences of a US debt default to the global economy. It is a sign of how much it has stagnated that the start of the US reporting season is hardly being talked about. As ever Alcoa will start the ball rolling, posting figures after the close, with JP Morgan and Wells Fargo rounding off the week.
Gold’s inability to stretch its legs despite growing concerns over the US president’s handling of the government shutdown should be ringing alarm bells with gold bulls. After the failure of the Syrian situation to kick-start the price, this could only be viewed as another missed opportunity.
Currency traders are finding it difficult to gauge the generic strength of the US dollar thanks to the scarcity of pertinent US economic data. Subsequently most of the currencies paired with the dollar appear to be treading water, waiting for a reliable catalyst to give it a sense of direction.