MARKET UPDATE – WE’VE RETURNED TO MARY MAGDALEN’S SEPULCHRE

Despite the DAX reaching to the sky yesterday looking for new ‘highs’ the FTSE 100 was still contemplating its undersized navel as it added just 28 points to 6759 at 3.00pm. Thank goodness there are another 50 weeks until Christmas, as volumes were indescribably light – so frighteningly low that redundancies are staring the market in the face if activity does not pick up. The mood is quite positive, with plenty of IPOS in the pipeline and a feeling that equities could select another gear if the data continues to improve. Even the economies of Spain and Greece are beginning to look just awful rather than desperate, with 10-year bond yields falling steadily – Gilts 2.95%, Germany 1.90%, Spain 3.90%, Italy 3.93%, Portugal 5.50%, Greece 8.03% and US treasuries 2.96%. Perhaps the BOE and the ECB can hold rates for some time at close to zero for some time to come.

Shares in Lloyds, HSBC and RBS led the charge today – all adding over 2%. No one can really explain to me why. It seems the reason is a buoyant retail spending market, particularly car sales, which have increased by 10.8% since last year with 2,264 million units being sold – 600 a day. The momentum for sales has come from bank PPI repayments to clients. Also deals including Vauxhall are offering 5 year loans at 0%. Hybrid sales are up 20.5% – 32715 units, which represents 1.4% of the total sales. Also it is thought that increased capital requirements may not be so great. So the market lapped up the upbeat sentiment in this sector, despite Andrew Tyrie’s rather terse comments directed at the FCA’s Clive Adamson for the incompetent handling of the Rev Paul Flower’s appointment as chairman of Coop Bank.

On the downside some mining stocks such as Fresnillo, were friendless in the ring, with China showing scant interest in buying more than the bear minimum of base metals. Severn Trent was shunned and Royal Mail was downgraded by Cantors, triggering a 1.9% loss in value. Who really cares what Cantors thinks of Royal Mail. As Catherine Tate says so succinctly – “Am I bovvered!” Dunelm, after a handsome run on the rails, eased by 2% – basically the stock travelled and arrived, resulting in a little profit taking. Topps Tiles added 0.7% on a good trading statement. RSA may have reached the bottom on valuation after 2 profits warnings, but only gained 0.1% after its 7% gain yesterday. easyJet added just 0.2% after a satisfactory trading update. J Sainsbury & M&S were both suffering from pre-prandial neurosis ahead of trading statements on Wednesday and Thursday respectively. These two retail giants are likely to post disappointing like for like sales over the Christmas period – down -0.5% and -0.2% respectively. If this sales figure for Sainsbury is accurate this will be the first time in 35 quarters that Sainsbury has not increased sales – since Justin King arrived! – Justin King to replace Mark Bolland in 6 months time? Return of the prodigal son!

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