Equity Markets See Increased Volatility
Equity markets have spent most of the day pinging between negative and positive territory, clawing their way back higher buoyed by slighter better than expected UK GDP figures, followed by US GDP figures that came in slightly better than markets had been pricing in.
UK Q2 GDP came in at 1.2% slightly better than expected, helped in no small part by a better performance from the construction sector.
Even so commodity and resource stocks are still struggling with BP, Tullow Oil, Anglo American and BHP Billiton all struggling to make ground.
Banks are also a weak spot after ratings agency Standard & Poors suggested management at Barclays, HSBC, Lloyds and RBS played only a small part in their share price and business recovery, with government stimulus programmes far more important.
US financial spread trading markets opened about 50 points higher, helped in no small part by the US Q2 GDP numbers coming in slightly better than had been expected.
Expectations had been for a downgrade from 2.4% to 1.4%, but in any event the reality was a downgrade to 1.6%, still bad, just not as bad as had been expected. However any rally looks like it could be short-lived given the general nervousness surrounding investor sentiment.
The bidding war between Dell and HP over data storage company 3Par has continued apace with the latest bid of $30 a share from HP, trumping Dell’s matching bid of $28. Maybe they should stick 3Par on eBay and have done with it, and let them slug it out between them?
Chip maker Intel has also spooked the market by downgrading its Q3 revenue estimates.
Bernanke’s comments from Jackson Hole didn’t change much from a market perspective, and in some respects the better than expected GDP numbers have helped him out by enabling him to be able to reiterate what he has said previously with respect to stimulus measures. He says that the Fed stands ready to act to provide additional stimulus if necessary, especially if the outlook weakens significantly.
However he went on to say that at this stage the Fed has not agreed on specific criteria, or triggers for further action. Stocks slid back on these comments to re-test this week’s lows, but appear to be holding above them for now as the appetite to break through them doesn’t appear to be in place ahead of the long weekend in the UK.
Elsewhere in day trading, the figures have offered the US dollar a brief respite against the yen, breaking above the 84.75/80 area and over-spilling towards 85.20, however dollar gains could well be limited before yen strength starts to take hold again.
The pound has slid back, despite better than expected UK GDP numbers with the market choosing to focus on the fact that business investment only rose 1.9% against an expectation of 6.2%, suggesting some uncertainty in the business sector ahead of this October’s spending review.
By Michael Hewson, Market Analyst, CMC Markets.
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