It seems yesterday’s move higher in the US to a new record high on the S&P500 was the catalyst that propelled the FTSE
100 to its highest close since December 1999.
It also briefly saw the London market push briefly above its previous intraday high
seen in May last year at 6,875, and with it has raised the prospect of the possibility that we could be set to close in on the previous all-time high of 6,950.
It is becoming increasingly hard to imagine what could prevent a test of the all-time highs given the current resilience off all markets
to continued disappointing economic data, concerns surrounding the recovery of the Chinese economy, emerging markets unrest, as well as mixed earnings data.
It could be argued that yesterday’s M&A activity helped boost sentiment,
but most of yesterday’s move happened well after the various announcements had been made, and not as a result of them.
As we look ahead to this week’s US data it is hard to see what data item is likely to surprise to the upside
given the continued cold weather afflicting the US, with US GDP expected to be revised lower on Friday
, yet investors seem to have a touching confidence that as soon as the weather warms up and the clouds clear that all the data is likely to bounce back, like a phoenix from the flames.
The only positive data of note we saw yesterday was the continued resilience of the most recent German IFO survey
which has maintained its positive tone of the last few months, and along with a slight up tick in annual euro inflation to 0.8% from 0.7%, keeps the markets guessing with respect to any potential easing steps from the ECB at next week’s monetary policy meeting.
On a monthly basis prices dropped sharply, falling 1.1% in January; with the bulk of the fall being attributed to a drop in non-energy industrial goods.
Today’s German GDP numbers
aren’t expected to provide any surprises with the final Q4 reading expected to be confirmed at 0.4%. The biggest concern remains in the component parts of the GDP numbers with a capital investment expected to come in at 0.8%, well below the previous quarters 1.6%, while private consumption is expected to come in at -0.1%.
All the key GDP components are expected to show weaker readings
compared to Q3, across the board, and in the longer term that could be a worry.
Last week we saw retail sales in the UK show a sharp fall in January of 1.5%
, a much bigger decline than expected, though given the sharp rise seen in December, it wasn’t entirely unexpected.
Since the UK has also had some really awful weather
it would not be entirely surprising if we were to see a soft patch in economic data in the first quarter of 2014, particularly in February, in light of the widespread flooding.
Today’s CBI retail sales data for February
could well be an early indication of an impact on consumer shopping patterns over the last few weeks.
Mortgage approvals for January are also expected to show a slight rise to 47k from 46.5k.
In the US
the latest consumer confidence data for February
is expected to show a fall to 80, from 80.7, however this number is becoming increasingly meaningless as it has little or no correlation with US retail sales numbers
, or personal consumption rates
, which have been trending lower for the past 4 months, coming in at 0.5%, 0.3%, -0.1% and -0.4%. All the while consumer confidence has been rising, at the same time that sales have been falling.
– another day and another range trade day, struggling to move much beyond recent highs, with the key resistance still at 1.3840, long term trend line resistance from the all-time highs at 1.6040 and ultimately this remains the key obstacle to a move through 1.4000. The euro bias still remains negative while we remain below 1.3840 but the lack of any dip does raise the concern we could push higher.
– lower highs and lower lows has been the theme for the past few days. The failure at 1.6820 last week keeps the risk for a fall back towards 1.6510/20, particularly if GDP data disappoints later this week. The bias remains for further gains but we could well see a correction first.
– the current rebound appears to be finding resistance near the 0.8270/80 area. While we remain below the long term trend line resistance above 0.8330, the bias remains for a retest of the 0.8160/70 area. A drop below 0.8160 targets a move towards the 2010 lows and 0.8065.
– the US dollar continues to find selling interest anywhere near the 102.80 level with a move above the 103.00 area required for a move back higher. This suggests that the risk remains for a drift lower towards the 200 day MA at 100.20. Last weeks low at 101.40 keeps the pressure on the downside with the first support at the twin lows at 100.80. To stabilise we need to see a move back above the 103.00 level, and the highs this month to argue for a return to the 105.50 area.
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