FTSE 100: Still hovering around 4800 support but the index remains well above the key support levels of 4600 and 4517.
Yesterday’s comments by US Federal Reserve officials and Trichet suggest that central banks have a differing view than investors over the sustainability of the recovery. This was particularly clear by the ECB for two reasons. The staff forecast of growth, though revised higher, remains substantially more benign than the general consensus of economists, where growth for 2010 is expected to be around 0.8%. The second reason was Trichet firm comments on a wait and see strategy when questioned in the press conference about the potential exit of its accommodative measures. Both of these would suggest that the ECB is more concerned that the economic path to growth will follow more closely a “W” shaped recovery; than is currently being discounted in the market.
This reluctance on the part of the Federal Reserve and the ECB to discuss any exit from their accommodative measures continues to leave markets in a sweet spot. Movement in other asset classes such as commodities would also suggest that risk appetite remains in place. This coupled with equity markets continuing to hold above key support levels indicates that investors, at least, are more optimistic than central banks on the sustainability of the recovery.
Today, the key data release is in the US with non-farm payrolls data. The consensus in the market is for -230K and an unemployment rate of 9.5%. However, given the marginal improvements seen in the employment component of key surveys recently the risk is for a better non-farm payroll figure.
Sources: Reuters: BBC: Bloomberg: Lawshare: Deutsche Bank (db): Proquote: Financial Times: Wall Street Journal: CLSA: Sharescope: Market News. Capital Economics: CNBC: Wikipedia:
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