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Prospect of Monetary Stimulus boosts markets? Latest Market Analysis

After a fairly neutral start to what would be a fluctuating day in financial markets, the FTSE gained around 30 points as miners fared well in response to above forecast GDP growth in China. It wasn’t long before European concerns reoccupied investor’s minds, Moody’s previous downgrade of Irish debt contributing to concerns that pushed the FTSE marginally into negative territory. The FTSE subsequently reverted its course to rebound strongly in reaction to comments by US Federal Reserve chairman Ben Bernanke, which hinted toward further monetary stimulus if the US economy remained weak. Adding to positive sentiment, the ratings agency Fitch suggested that Italy should be able to reduce its deficit over the next three years, hinting towards better financial health than depicted by its worrying pile of debt. The UK market managed shrug off four straight days of declines to close the day up 0.6% at 5906, with the CAC40 and DAX indices putting on 0.5% and 1.3% respectively.

Shortly before the US market opened and on a day that saw parliament unite behind a motion against its prospective bid, News Corp announced that it was retracting its offer for BSkyB. The news initially led to steep declines in the shares of the London listed media group, although it managed to gain ground throughout the day to finish up almost 2%. Given that a takeover has been priced into share of BSkyB, it will interesting to see how the market values the group as an ongoing business.

Commenting in an Interim Management Statement, Marks and Spencer pointed to a challenging trading environment going forward, in light of cash strapped consumers and higher input prices. Despite also announcing that the group had increased market share in both clothing and food sectors, the market reacted badly to further evidence of a troubled high-street, with shares in the bellwether closing down 2.5%.

The continuing fears surrounding Europe, followed by dollar weakness on increasing QE talk saw gold hit a record high. The metal, which is seen as a safe heaven and a better store of wealth than fiat currencies, broke above $1584 per troy ounce mark. Similarly, silver had a sterling day which, at the time of writing, had seen the metal gain over 5% to $38.11 per troy ounce.

This was posted in Bdaily's Members' News section by John Dance .