FTSE is up by some 25 points this morning at 5736  in a quiet European session that comes on the US Labor Day holiday, which officially marks the end of Summer as far as the markets are concerned. With  Wall Street closed this afternoon we have probably seen the best of London market for today already, though the end of the week will see the release of the August Non Farm Payrolls data ( US Unemployment) which will be keenly scrutinised  for clues about the health or other wise of the US economy and what that means in regard to the likelihood of a third round of QE in the USA.

London has been led higher by Mining stocks once more ( they are better on hopes of  further stimulus measures  for the Chinese economy ) indeed all but 2 of the top 10 gainers are from that sector. 

Vedanta  and Fresnillo are the best performers up by 3.5% and 4.2% respectively. The days principal fallers are  Admiral Group and ARM  Holdings which have given back 3.46% and 2.44% respectively.

Volumes are on light side as we would expect on a Monday, though Glencore has traded 16 million shares in the session  so far, as the company decides not to improve its offer for Xstrata. The bid, which has not received the backing of key shareholders,  may now fall at the last hurdle.

London's blue chip equity index has made gains of around 15 points this morning and for now at  least the 5700 level remains intact, London's blue chip equity index has made gains of around 15 points this morning and for now at  least the 5700 level remains intact, though we have printed as low 5708 this morning. 

 

Mining stocks have helped the index into positive territory  with Kazakhmys up by 2.8% and Glencore better by 2.35%. The  move looks more sustainable however as it is supported by trade in around 4 million shares.

 

Vodafone is the most active security in the top flight today with turnover above 15 million shares though it is being run a close second by Lloyd's bank.

 

WPP are the days biggest  faller weaker by 1.41% as I type and I note that ITV, which we mentioned earlier in the week, have slipped back to 83.6p  down by just under 1% this morning.

 

Futures markets suggest  that US markets may open modestly better this afternoon.

FTSE has weakened further  this morning as concerns about Europe come to the fore once again. The semi autonomous state of Catalonia has asked the Madrid government for €5 billion to help it make ends meet . The economy of Catalonia is bigger than that of Portugal and the regional government has more than €40  billion of outstanding debt, so these are not insignificant developments.

FTSE has tested back to as low as 5739 this morning but should selling momentum pick up  then tests of 5700 and recent lows around 5685 are likely to be on the cards.

Miners and banks are  the days principal fallers whilst Utilities are the notable gainers presumably finding favour  for the defensive qualities.  Mobile phone operator Vodafone regains its spot as the most active blue chip with turnover on the day at more than 20 million shares, comfortably outstripping Lloyds and Barclays which have traded around 14 million shares each on the days so far.

Overall  however volumes  are very much on the light side and it feels  very much as though  many participants have extended their bank holiday break. US markets are seen as opening fractionally lower this afternoon and the malaise  in European markets  may spread across  the pond as well.

FTSE resumes trading today in a similar fashion to Fridays uninspiring session.

The index of blue chip equities is down by 10 points in a thin morning with few standout features . One stock that does standout however is DIY retailer Kingfisher, owner of the B&Q chain here in the UK which have fallen by 3.78% this morning, following a downgrade by respected US broker BOA Merrill Lynch, who cite the poor French retail market and who have sharply reduced their 2014 forecast for the home improvements group.

Gong in the opposite direction are broadcaster ITV which have added 2.2% this morning, having been written up at both Deutsche Bank and Citi Group today. The stock has printed as high as 85.4p in the session and though that's still well below the 52 week high of 91.25p be aware that the stock has historically struggled to break cleanly above 87/88p.

On the Macro front the meeting of the world’s Central Bankers at Jackson hole Wyoming is occupying traders’ minds.

The possible contents of Federal Reserve chief Ben Bernanke’s speech from the mountain retreat and ECB chief Mario Draghis non attendance are just two of the variables on their mind. However last year’s event was also highly anticipated and turned out to be an major anti climax so we could be in for more of the same.

London markets look set to head into the bank holiday weekend below the 5800 level despite an upward revision in UK GDP figures for the first half of 2012 which, was released  this morning.  

 

EU Premiers are meeting today and the finances of both Greece and Spain will be top of their agenda Greece will likely ask for concessions in its enforced austerity measures whilst Spain could use the meeting to explore what help may be available to Madrid from the ESM/ESFS though may stop short on this occasion at least of a formal request for aide. 

 

US futures markets suggest a weaker open for Wall Street this afternoon is on the cards.

London's Index of top 100 shares had its biggest move for some this morning falling by more than 50 points to 5800 having tested below the round number earlier in the session.

The mark down is broad based as can is testified by the fact that 94 of the index constituents are down on the day with just half a dozen stocks in the black at the time of writing.

The day’s top faller is Kingfisher down by 3.5% following a downgrade for the retailer at Deutsche Bank who moved from buy to hold and cut their price target to 315p from 340p previously though that remains well above the current 284p price for the stock.

With the long week ahead in the Bulls of the FTSE will be keen to keep the index above 5800 but the market is weakening once more as type and posting new lows on the day so this prove to be easier said than done. Currently futures markets are indicating a flat open for US markets which sold off into the close last night. The S&P 500 had made new 52 week highs in the session but failed to hold on to that higher ground.

London’s FTSE is marking time once more this morning up by 14 points or just 0.25% in another session characterised by low volumes.

Mining stocks are the best performers this morning with 7 out of the top 10 gainers hailing from the mineral resource sector.

Fund manager Ashmore is the day’s biggest faller after the emerging markets fund manager was mentioned in a note from HSBC this morning though in truth the fall is a modest 1% on just over 220,000 shares traded, so nothing to shout about in the grand scheme of things.

Europe remains in focus with next week’s EU summit foremost in peoples’ minds. Although many participants will also be thinking about the long bank holiday weekend here in the UK and the run up to Labor Day in the USA, thereafter, which traditionally signals the end of the summer , as far as markets are concerned. Whether or not that will mean a return to higher volumes and more day today interest in equity markets however remains a moot point . US markets are called to open modestly better this afternoon with index futures suggesting single digit gains for Wall Street from the off.

Once again markets start a new trading week with whimper not a bang, Spanish bond yields have fallen back to around 6.3% this morning on hopes that EU action will prevent the need for a full scale bail out however the equity markets are rather more sanguine about that prospect.

The index of London's top 100 shares is down around 6 points in woefully thin session with no real volume outside of That in Lloyds Banking which are also the days only significant gainer up by nearly 3%.

Lonmin on the other hand slip back once ore following a broker downgrade and it’s hard to see how production / normal labour relations at their Marikana mine will be resumed any time in the near future, after the terrible loss of life seen during last week’s clashes between miners and the police. Many other mining names are weaker in sympathy this morning.

At this early juncture US futures suggest that Wall Street will open up by around 10 to 15 points but with Q2 earnings season over markets over the pond are also in need of additional stimulus.

London Markets remain becalmed today with the index of top 100 shares barely changed on the day, after a lacklustre US session last night.

Where stocks have moved this morning they have done so on light volumes, for instance there is less than one million shares of combined turnover between the top 5 FTSE gainers, which comprise Russian and Kazak miners and UK engineers.

Europe remains in the headlines with Spain hoping to receive the first tranche of bailout funds imminently, although there is already talk that the money may not go directly to the countries banks.

There are also reports in the German press that Politicians there wish to reweight voting rights amongst EU member states - a hot potato if ever there was one.

Once again US markets are called open marginally better ahead of their 14.30 start and I doubt we will see any fireworks stateside this afternoon. Perhaps it’s just as well that (weather permitting) the test match against South Africa is starting today as that will be the only event on a screen today that is likely to hold our attention.

The start of any new month brings with it the first slug of major economic data in the US and this week Friday 1st April will contain the major data announcement of the month with the Non Farm Payroll data for March as well as the ISM Manufacturing Index for March. The employment data always takes the lion’s share of the news headlines and this month will be particularly important with the market desperate to see a continuation or even improvement on the trends reported last month. What it won’t want to see is another weak gain suggesting that whilst employment is improving it is not improving anywhere near enough to make a material difference to the recovery. The headline number for February increased by +192,000 and within that private payrolls increased by a strong +222,000. This month the consensus is expecting a headline number of +200,000, but the range of estimates varies considerably with some expecting a number close to +300,000 and the worst published number is around +160,000. The ISM manufacturing index is at its highest level since May 2004 with the last reported number of 61.4 for February and estimates for March are expecting a modest dip with the consensus expecting 61.2. The US manufacturing sector remains a bright spot within the US economy and the recent regional reports suggest on balance that the momentum is being maintained and we could even see a slight improvement on the last month, although it does seem likely that the ISM is now close to its peak.


In the UK this week all eyes will be on the final estimate for 2010 Q4 GDP growth which is expected to remain at the previous estimate of -0.6% when it is published tomorrow. The preliminary reading for this was -0.5% and the downgrade did come as something of a shock last time given that most were expecting a modest revision upwards after the shock contraction during Q4. It remains to be seen if the final estimate will change but the market focus will now be on what Q1 brings especially given the ongoing debate over where monetary policy is headed over the coming months.

Today in the US we have had pending home sales data for February which was a little better than expected at +2.1% month on month although this does follow on from a -2.8% decline over the previous month. Overall there is no sign yet of any real improvement in the US housing market.

There has been no major data today in the UK and Europe.

Tomorrow in the US brings the Conference Board’s latest consumer confidence reading for March. This is likely to reflect the worries over Japan and developments in the Middle East and North Africa as well as the ensuing dip in world equity markets. The consensus is expecting a decline to 64.0 from the last reported reading of 70.4. In Germany tomorrow the CPI for March is due for publication and we also get the latest German Gfk Consumer Confidence survey.

World equity markets are continuing to recover the ground lost as a result of fears over Japan and the ongoing situation in the Middle East and North Africa. It is difficult to say if the rally will be sustained but at present there does not appear to be any imminent negative news flow to upset the balance. However, there are still a good number of hurdles to be overcome over the coming weeks and months. The possibility of a bail out for Portugal has come a step closer with the resignation of their prime minister, although a bail out is now widely anticipated and is unlikely to have the shock factor as previous rescues have had. It will not be long before uncertainty over the expiry of QE2 in the US starts to grab the attention of world markets and that is likely to be the next major market event.


In the US today the final revision to Q4 2010 GDP has been announced and it has been revised upwards to 3.1% annualised from the last reported number of +2.8% and the first estimate which was +3.2%. The upward move was predominantly due to higher inventory replacement than what was initially estimated. It remains to be seen if Q1 delivers a similar result with consensus estimates somewhere between +2.5% and +3.0%.

The University of Michigan Consumer Sentiment index due out today is likely to have an impact on how markets trade this afternoon. After the drop from 77.5 to 68.2 at the last reading the market is looking for the index to have stabilised around 68.0. The situation in Japan and the ensuing drop in equity markets may well have had an impact on the latest reading.

The Ifo Business Climate Index for Germany has been published this morning and it has declined to 111.1 from 111.3 which is the first decline in this index since May 2010. It is a very modest fall and is probably attributable to the recent events in Japan and the drop in world equity markets, and as a result the decline is not that significant and the index remains well into growth territory.

The UK Budget was as expected met with relative indifference by the market yesterday. With concerns over the nuclear situation in Japan now subsiding and the ongoing military action in Libya seemingly discounted in the oil price (which is relatively static at present albeit at near recent highs), the market focus may again be brought back to the economic data. European markets are currently showing gains of around 1% on the day with the Dow futures currently up around 50 points.


In the US yesterday new home sales data for February was substantially below expectations with a decline to an annualised rate of 250,000 which compared to consensus expectations of 290,000 and the last reported number of 284,000. The US housing market goes from bad to worse and is going to take years to recover.

On the agenda in the US today are durable goods orders for February which is expected to show a +1.5% month on month gain after a +2.7% gain last month. Durable goods data is notoriously volatile and the estimates for the current month are quite broad with some expecting a negative number. Also due for publication this afternoon is the weekly initial jobless claims which according to the consensus is expected to remain at 385,000.

The minutes from the latest Bank of England MPC meeting published yesterday revealed no change in the voting pattern with three member supporting a higher base rate (one for a +0.5% increase and two at +0.25%). Five members voted for no change with Adam Posen in favour of more quantitative easing. The debate over monetary policy in the UK continues to rage but with a weak consumer outlook the argument for maintaining a relaxed policy is very strong. However, inflation continues to dominate the headlines and the pressure is undoubtedly building for action.

UK retail sales data published this morning for February was disappointing with a -0.8% month on month drop. The consensus was expecting a -0.6% decline after the +1.9% increase in January. The retail sector is one area that is likely to remain under pressure for many months to come. After the January increase it looks likely that consumer spending has slowed significantly. This will place further pressure on the GDP number for Q1 which is likely to show a very modest increase at best with an outside chance of another quarter of contraction.

In Europe this morning the Purchasing Managers Index for Services and manufacturing for the Euro zone and Germany has been published. The services index for both increased on the last reported number with a particularly strong performance from Germany whilst manufacturing is showing some signs of slowdown across the region although it remains well into growth territory.

The main news of the day has to be the latest reading for the UK CPI which increased yet further to 4.4% on an annualised basis compared to consensus expectations of +4.2% and the previous reported level of +4.0%. The main driver for the headline rate was a record increase in the price of clothing and footwear. Even the core rate which excludes the impact of food and energy rose to a heady +3.4% annualised compared to expectations of +3.1% and the last reported rate of +2.9%.. Today’s news undoubtedly places more pressure on the Bank of England’s MPC which judging by the last vote is now very close to the first interest rate hike. The news today may well tip the balance at the next meeting. The minutes from the last meeting which are due for publication tomorrow will make for very interesting reading. If we see a fourth member voting for an increase at the last meeting the probability of a decision in favour of a +0.25% next time will increase significantly. However, it also has to be borne in mind that the recent data for UK plc is not particularly encouraging, especially GDP growth which looks likely to be muted at best during Q1 and the Bank of England MPC faces a very difficult situation at the next meeting.


In the US yesterday the existing home sales data for February was disastrous with a month on month decline of -9.6% to 4.88m units on an annualised basis. The consensus was looking for 5.15m units annualised. In addition, US house prices fell by 1.1% during February bringing the 12 month decline to -5.2%. Without a healthy housing market it is very difficult to see how US consumer spending is sustainable and the more recent decline in the confidence indicators may well in part be a reflection of the dire housing market.

The debate over whether QE3 is a real possibility is now starting to gather momentum given that the end of QE2 is now a matter of 3 months or so away. It is interesting to see some commentators already suggesting that QE3 is highly likely. At this stage it is impossible to say what will happen as much will depend on what the economic data is telling the Fed nearer to the time. What is clear is that as we approach the end of QE2 market nerves are likely to increase significantly and we can expect some significant market volatility yet again as the decision time looms.

In Europe, tomorrow looks likely to be a crucial day for Portugal. A parliamentary vote on a new austerity package is due to take place and according to current reports the minority socialist government is heading for defeat. The end result looks likely to be the resignation of the prime minister which will bring a bail out that much closer. We can expect some headline on this tomorrow which may well unsettle the market.

The main news of the day has to be the latest reading for the UK CPI which increased yet further to 4.4% on an annualised basis compared to consensus expectations of +4.2% and the previous reported level of +4.0%. The main driver for the headline rate was a record increase in the price of clothing and footwear. Even the core rate which excludes the impact of food and energy rose to a heady +3.4% annualised compared to expectations of +3.1% and the last reported rate of +2.9%.. Today’s news undoubtedly places more pressure on the Bank of England’s MPC which judging by the last vote is now very close to the first interest rate hike. The news today may well tip the balance at the next meeting. The minutes from the last meeting which are due for publication tomorrow will make for very interesting reading. If we see a fourth member voting for an increase at the last meeting the probability of a decision in favour of a +0.25% next time will increase significantly. However, it also has to be borne in mind that the recent data for UK plc is not particularly encouraging, especially GDP growth which looks likely to be muted at best during Q1 and the Bank of England MPC faces a very difficult situation at the next meeting.


In the US yesterday the existing home sales data for February was disastrous with a month on month decline of -9.6% to 4.88m units on an annualised basis. The consensus was looking for 5.15m units annualised. In addition, US house prices fell by 1.1% during February bringing the 12 month decline to -5.2%. Without a healthy housing market it is very difficult to see how US consumer spending is sustainable and the more recent decline in the confidence indicators may well in part be a reflection of the dire housing market.

The debate over whether QE3 is a real possibility is now starting to gather momentum given that the end of QE2 is now a matter of 3 months or so away. It is interesting to see some commentators already suggesting that QE3 is highly likely. At this stage it is impossible to say what will happen as much will depend on what the economic data is telling the Fed nearer to the time. What is clear is that as we approach the end of QE2 market nerves are likely to increase significantly and we can expect some significant market volatility yet again as the decision time looms.

In Europe, tomorrow looks likely to be a crucial day for Portugal. A parliamentary vote on a new austerity package is due to take place and according to current reports the minority socialist government is heading for defeat. The end result looks likely to be the resignation of the prime minister which will bring a bail out that much closer. We can expect some headline on this tomorrow which may well unsettle the market.

All eyes remain focused on Japan at present and after yet another significant sell off in the US and Europe yesterday, European markets have opened in positive territory this morning. The Nikkei recovered most of its early losses last night and hope that the situation will be brought under control soon appears to be the driving force behind the better performance this morning. The situation in Libya and the more recent events in Bahrain are also a real concern for markets and may well impact on sentiment, although the oil price has given up some of its recent gains which does provide some short term comfort.


With everything that is going on around the world at present the economic data is taking something of a back seat. Starting with the UK yesterday we had the latest unemployment data for February. The claimant count fell by 10,200 but the unemployment measure provided by the ILO which is a broader measure actually increased by 27,000 between November and January to 2.53 million. This led to a slight rise in the overall rate of unemployment to 8.0% from 7.9% which is its highest level since 1996. The actual number of people in employment rose by 32,000 but the number of jobs being created is simply not keeping up with the growth in the labour force. Overall the trends in UK employment remain weak which is likely to hold back consumer spending and this is a factor that is also likely to weigh on the UK housing market.

The OECD published their forecasts for UK growth yesterday. They are expecting sluggish growth for the next two years with growth of 1.5% in 2011 and 2% in 2012. This compares to the forecast from the Office for Budget Responsibility which is expecting growth of 2.1% in 2011 and 2.6% in 2012. Given current trends the OECD forecasts look to be more realistic. The OECD argues that interest rates should remain lower than what the market is expecting and the first interest rate hike should come in the second half of the year at the earliest.

In Europe yesterday the final Euro zone CPI estimate for February was published and it came in at 2.4% from the previous estimate of 2.3%. As in the UK the Euro zone headline rate of CPI is above the targeted ECB level which is just under 2% but unlike the UK it is still within a comfortable distance of target. The UK rate is double the target of 2%. The core Euro CPI rate which excludes food and energy fell from 1.1% to 1% which remains relatively low and suggests that firms are absorbing the more recent rise in input prices rather than pass it on to the consumer. The ECB has been indicating that with the recent inflationary pressures the Euro interest rate will increase next month. However, there has to be some uncertainty over this given the hit sentiment has taken from the Japan disaster and the ongoing problems in North Africa and the Middle East.

The terrible state of the US housing market was again demonstrated yesterday with the housing starts data for February which fell to 479,000 on an annualised basis compared to the January number of 618,000. The consensus was expecting 560,000. This is certainly a reflection of low housing demand at present in the US although some of the movement may be due to bad weather conditions preventing construction work from being started. Either way the US housing market remains in a very sorry state.

The other significant data announcement in the US yesterday was the Producer Price Index for February which increased by a very significant +1.6% month on month. This was against consensus expectations of a +0.7% increase. The boost to the PPI has come from the impact of higher energy and food prices. Clearly there will be short term inflationary pressures moving through the system as a result of higher input prices but this is still expected to be only a temporary situation and is unlikely to result in any change in Fed policy.

Today in the US look out for the weekly initial jobless claims which are expected to fall to 385,000 from the previous reported level of 397,000. We also get the CPI data for February with the headline rate expected to show a month on month gain of +0.4% whilst the core rate is expected to remain at a very subdued +0.1%. The Philadelphia Fed Manufacturing survey is due for publication this afternoon and is expected to show a modest decline to 32.0 from the February level of 35.9. Finally, Industrial Production for February will be published with the consensus expecting a +0.6% month on month gain.

There is no major data due for publication in the UK and Europe today.