10.08.12 Friday Morning

Equities have very much remained range-bound this week, with the FTSE 100 holding 5,800 and the S&P 1,400. The S&P is enjoying a particularly good run, spurred on by better-than-expected earnings, positive jobs numbers and the absence of bad news from Europe. In fact, this year’s summer, poor as it might be, has been accompanied with at least a return of confidence for stocks.

In FX markets, the euro has dislocated from other risk assets and has been well offered, trading now at $1.2270 compared with $1.2400 at the start of the week. Sterling has remained steady at between $1.5700 and $1.5550, outperforming the euro for the majority of the week against the dollar. The state of the market is still that the euro offers traders a proxy to the euro crisis, and although two year peripheral debt instruments have recovered significantly from yielding above 7%, yields have this week been steadily creeping higher – an indication that bond markets are still far from convinced that the path ahead looks free from catastrophe.

Commodities have remained range-bound, too. Gold has traded above $1,600 for the majority of the week, with silver highly correlated. The theme that metals trade in line with inflationary expectations and QE anticipation is still intact as prices are sensitive to changes in sentiment.

Standard Chartered will probably win the most talked about equity of the week award, if there is one of course.  Earlier in the week, news reports from the US reported that the UK’s second biggest bank was under investigation for money laundering offences allegedly taken place in Iran.  On the first day of trading following the announcement, at the low, the bank shed almost a quarter of its value.  The UK banking sector as a whole shed gains too as investors became exhausted by the series of scandals surrounding the industry in recent times.

The week ended relatively downbeat, as poor Chinese export data showing the biggest drop since January this year allowed bears to take control of the global markets. 

Not even the anticipated IPO of Manchester United was enough to excite investors appetite for risk as the share enjoyed a fruitless opening, shifting between small gains and trading flat line.  This is after the IPO price was cut from $16 to $14.  Clearly, investors have more sense than loyalty as the possibility of owning a stock which fails to yield a dividend nor voting right is proving unattractive.