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BP powers FTSE to five month highs
00:00, 29 October 2013
Europe Markets have once again reacted well to some fairly indifferent earnings reports simply because they have been slightly better than expected. The rally has also been helped by some fairly indifferent US economic data which has increased the probability that tomorrow's Fed meeting could well see growth forecasts for the US economy nudged downwards with the likely outcome that any tapering prospects get pushed out further into the middle part of 2014. The best performer in the UK market has been oil giant BP which reported slightly better than expected numbers for the third quarter. While profits fell sharply the company announced it intended to embark on a further $10bn worth of disposals, while returning cash to shareholders, while at the same time making lower provisions in respect of compensation claims for the Gulf of Mexico oil spill. UK house builders are also making good gains after this morning's mortgage approvals data for September continued to improve, with Persimmon one of the big gainers on the benchmark index. On the downside Lloyds Banking Group shares have slid back after making five year highs last week after the bank increased its provisions in respect of miss-selling which wiped out its profits for the quarter. At some point the argument that these items are one-offs will start to wear a bit thin, especially since the amount set aside is now over £8bn. The move to the downside is also not too much of a surprise given how geared CMC clients have been to the long side in recent weeks. Coca-Cola Hellenic is also amongst the bigger fallers after a downgrade from Nomura. US US markets continue their advance to new record highs driven by expectations of tomorrow's Fed meeting conclusion and earnings numbers that aren't exactly spectacular but remain robust enough to suggest that the US companies will be able to continue to generate returns at a higher enough level to warrant further gains. As things stand the S&P500 is up over 25% this year so far, which for a US economy ambling along at around an annualised 2% growth rate gives an indication of how much easy monetary policy has turbo charged stock markets. US consumer confidence dropped sharply in October from 80.2 in September to 71.2, as a result of the government shutdown. Given that retail sales were slightly disappointing on the headline number for September and that other ADP October jobs data due tomorrow could well also show similar weakness investors are surmising not unreasonably that we could see the Fed revise down its economic forecasts over the coming months. Apple shares hit their highest levels since January this year, before slipping back after last night's latest numbers showed that demand for iPhones continued to remain fairly robust, and the company's ability to generate cash remained intact. Also posting good numbers pharmaceuticals giant Pfizer beat expectations for its most recent quarter, coming in at $0.58c a share, however on revenues the numbers fell short. FX Despite the likelihood of no real change to US monetary policy over the next day or so the US dollar index has enjoyed a bit of a bounce back having found support at the lows this year at around the 79.00 level. This 79.00 level is a key low given we've seen four attempts to break below it in the last 12 months, the most recent one being on Friday. The Australian dollar has been the worst performer today after comments from RBA governor Glenn Stevens overnight that he saw the currency significantly lower. These comments appear to suggest that the Australian central bank is becoming unhappy at the high value of the currency. It has been closely tracked by the Kiwi dollar ahead of a key RBNZ rate decision later this week. The pound appears to losing traction after some of the most recent economic data appears to suggest that the recent improvement in economic growth could well be starting to plateau. The euro has remained remarkably resilient helped in some part by comments from ECB member Nowotny that there was no imminent prospect of a rate cut. Commodities The recent rally in oil prices appears to be showing some signs of fizzling out, after this afternoon's disappointing US economic data, saw US prices slip back, though they remain off their lowest levels. While we saw a significant rally in Brent prices yesterday on supply concerns we've seen prices slip back as concerns about demand cap the upside somewhat. The rebound in the US dollar index today has helped cap gains in the gold price after hitting one month highs yesterday. CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.