Banks brush off CMA report. Sterling drops for fifth day running

‚ÄčEuropean markets were higher in early trading on Tuesday, dismissing the small overnight losses on Wall Street as Chinese inflation data met expectations.

Markets are drifting listlessly higher in lower volume August trading. Volume on the FTSE 100 was 754M on Monday, down from an average of 878M last week. A majority of the shares on the index were participating in Tuesday’s rise with 63 members higher.

The FTSE 100 was higher by less than a third of a percent by mid-morning after corporate results made Worldpay and Standard Life top risers and Legal and General the biggest faller.

There was a mixed market reaction to a report on the banking industry from the Competition and Markets Authority. Most banking shares on the FTSE 100 and FTSE 250 were higher after the release of the report. RBS shares were up over 2%, Barclays up 1% whilst challenger banks Aldermore and Virgin Money were flat and Shawbrook down 1.6% at 10am BST. Barclays is paying $100m to 44 US states to settle an investigation into interest rate manipulation.

There appears to be a clear understanding from regulators of the problem impacting competition for current accounts in the banking industry but less understanding on what can be done about it. The faff of switching accounts coupled with low interest rates means most people don’t shop around, overlooking potentially disingenuous overdraft fees.

The British pound fell to a one-month low, aiming for a five-day losing streak after dovish central banker talk and weak economic data. Data showed a rise a Britain’s trade deficit and smaller than expected growth in manufacturing production whilst the British Retail Consortium reported July retail sales were the strongest since January.

The Bank of England’s Ian McCafferty  told a newspaper that “If the economy proves to have turned down in line with the initial survey signals, I believe that more easing is likely to be required, but that can easily be delivered in coming months.” The jury is still out on the Brexit-effect for the British economy. The drop in the pound doesn’t appear to have bolstered trade yet but consumers are still spending, unearthing the respective theories or ‘Leavers’ and ‘Remainers’.

US stocks look set to open basically flat on Tuesday ahead of earnings releases from Walt Disney, Medivation, Coach and Solar City.

 

USA pre-opening levels

S&P 500: unchanged at 2,180

Dow Jones: 4 points higher at 17,533

Nasdaq 100: unchanged at 4,784

 

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