Markets continue to oscillate without making any significant moves either to the upside or downside and although so far in April we are squeezing out a very small gain the lack of any break outs has allowed clients to trade in and out of markets continually and profitably. This morning is eerily quiet following on from Captain Darling’s bombshell budget yesterday and after sterling got a little bit of a kicking it has shrugged off the news of the biggest budget deficit of all time and bounced off the support levels.
When looking at the current situation at face value it isn’t surprising that we see all the financial markets just drifting sideways. Equities have made good ground since the beginning of March and investors are simply questioning the validity of the recent move higher. Whilst there’s a lack of impetus to test and take out recent highs and a subsiding of any disastrous news to drive prices lower, we will most likely continue to sit where we are.
This morning retailers are propping the market up with some good news from Debenhams. It wasn’t long ago that some people were predicting that the department store might be the next big casualty of the high street but today’s results and their share price move certainly looks like a green shoot. The stock isn’t going to reward shareholders with a dividend for the time being, but with the share price near quadrupling so far this year who needs a dividend? As a result we see retailers blessing the FTSE’s leader board with M & S and Next making good ground. The retailer sector has certainly been attracting buyers having risen 50% since December last year, so maybe this is the signal that the bad times are over. Equities pre-empt recoveries at least a couple of quarters before they occur, so maybe the retail sector is suggesting we’ll return to growth by the end of the year, but the jury is still out on that one!
We see the usual weekly initial jobless claims in the US at 13h30 today followed by existing home sales at 14h00, but tomorrow’s GDP and retail sales figures from the UK will be closely watched. GDP is expected to fall -3.8% year on year and -1.5% quarter on quarter so any surprises to the upside may be just the sort of catalyst the market requires to test recent highs.
As mentioned above, cable bounced off 1.4450 after a sharp sell off and this morning is still attracting buyers as we sit at 1.4550 at the time of writing. EUR/USD is back above 1.3000, currently at 1.3070 so making a bit of ground on sterling as well as GBP/EUR heads back towards 1.1100. Sterling’s little run of good form from the beginning of March seems to have stalled rather like the equity markets and resistance sits up at 1.1400.
Gold is testing near term resistance and currently just above the $890 level at $893, but a move through $900 could lead to a test of $950 after that but one gets the feeling that it will require a fall in equities for this to happen.
Crude is a little better, back above $49, but this market too has suffered from “not doing anything” syndrome falling its decline from the mid 50s earlier this month.
As markets continue to trend sideways the anticipation of a big move in either direction builds, but recently each an every attempt to make a break out has been met with stiff resistance.
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