The 4300 level has provided support once again for the index and we're just half a percent point to the good with mining stocks leading the way and being assisted by a bullish note from Goldman Sachs on the sector.
The dog of the day is British Airways after reporting a record loss and the share price is suffering this morning. The UK carrier has had its fair share of turbulence over the past year and it's still impossible to forget about the shambolic opening of Terminal 5 at Heathrow. Not only are fuel costs to blame for massive fall in profitability, but passenger numbers are on the decrease, particularly the premium business and first class seats. Their hedges in oil futures when the price of crude went rocketing up to $147 a barrel last year looked to be a prudent policy, however few people predicted the incredibly quick correction in prices as they plummeted back to earth and BA's hedged positions meant they didn't benefit as much as they should have done from the fall in crude. The share price hasn't benefited in anyway from the rally since March and a 7% decline this morning to 153p makes the £2 mark, not seen since September last year, seem a very long way off. The airline industry is so competitive now that BA is facing attacks from all angles. Their transatlantic route is no longer a monopoly, of the few people left who travel business or first class there are a couple of dedicated premium airlines eating at their market share and prices are being driven lower in a bid to fill seats. BA's short lived dividend and the prospect of no recovery around the corner has also weighted on sentiment. Possibly merger talks have stalled and this position will make a tie up more unlikely as the pension deficit gets worse and worse.
With a bounce from last nights lows and the recent fall from 4500 the market seems perfectly content to drift sideways this morning and its possible to see that we could be in the same position for days, possibly even weeks to come as neither the bulls or bears force their hand. From a technical point of view the FTSE has formed a perfect "double top" around the 4500 mark which sometimes indicates that we will continue lower, but the bulls may not have finished and see the recent dip as another buying opportunity. If another attempt at 4500 fails leading to a "triple top" then that'll give further evidence that we're at the highs for the time being.
On the currencies, sterling had a sharp correction yesterday morning after the news that S & P were concerned about the outlook of the UK's credit rating. Cable declined sharply to 1.5525, but almost as quickly rallied back to mark another 2009 high! The momentum is firmly in favour of sterling against the dollar at the moment, although this morning at least there is a little profit taking following the UK GDP numbers, which were in line with expectations and we're at 1.5820 at the time of writing. The same was for GBP/EUR which saw a very sharp fall yesterday morning, but recovered afterwards throughout the rest of the day. At the moment though the euro is making a little ground and were back to 1.1344, with the attempt at a 3 month high around 1.1500 looking to have run out of steam.
Crude dipped from the highs briefly yesterday, only to reverse losses and we're back at the highs again this morning. The commodity seems to be completely discounting any data that suggests the global economy is still on its knees and if the price carries on like this, it looks like it won't be long before the OPEC members get their wish of $75 a barrel.
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