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UK stock market commentary (February 06, 2013): RBS reveals fine, but no heads roll

RBS is in focus today after announcing its Libor settlement with UK and US regulators which currently stand at a not insignificant £390 million. This is towards the low end of expectations so initial response from the market is positive as the shares are up on the open and it makes little sense to impose a hefty fine on a company that is 80% owned by the British taxpayer as in effect the regulators would be picking their own pockets. This slap on the wrist marks the end of yet another scandal for the bank, although of course it’s not the only one to receive such a fine, but what is interesting is that there are few calls for the resignation of the CEO as there were for the ex-Barclays chief Bob Diamond who’s head rolled shortly after they announced their fine. Perhaps Stephen Hester, who’s been a prominent figure in the press dealing well with all these problems the bank has faced, is seen as a slightly more acceptable face of banking whereas Bob Diamond was considered a pure investment banker with little concern other than his bonus. Either way you look at it the hope is that this is the final chapter in banking scandals, but we’ve heard this said before and can’t discount the possibility of another revelation around the corner.

A rebound in equity markets yesterday took US indices back to the highs that they saw at the end of last week however European indices have been a little more reluctant to recoup the losses incurred on Monday. For those US stocks the uptrend on the short term chart still looks very much intact yet for the Dow the 14,000 level remains a difficult hurdle to overcome. We saw another round of better than expected corporate results yesterday which triggered the rebound in the Dow taking it just shy of that 14,000 level to close up 99 points at 13,979. The rally also came at a time when there was a small miss in terms of the ISM non-manufacturing figure, albeit a small one. At the same time there was big news in terms of Dell, the third biggest computer maker in the world, which has agreed to be taken private.

The rebound in stocks does look to be continuing this morning as the FTSE gains more momentum taking it back above 6300 at the time of writing. It looks like London stocks are keen to match the US indices by getting back towards their highs for the year so for the bulls the resistance seen around 6350 is the next near term hurdle.

Ahead of the European Central Bank interest rate meeting due to take place tomorrow, the shared currency resumed its rally versus the greenback, climbing 65 pips to 1.3577. If investors were wondering whether a higher euro could dampen a European economic recovery (as French President Hollande suggested) it appears the ECB officials are not too worried but rather content with the current level. At the time of writing the single currency is trading at 1.3535 against the greenback.

Gold closed little changed at $1672.7 yesterday as it failed to sustain Tuesday's ascension after stronger than expected earnings led US stocks to rise. Investors are still including gold as part of their portfolios and looking for opportunities where it may break out of its sideways trading, but are also being tempted by equities in a climate of improving key economies.

Service industries across the US, although down from the previous month, were slightly better than estimated spurring optimism in the energy sector. Helped also by a recovery in equities combined with a renewed weakening in the US dollar, the WTI crude prices recouped some of the losses posted a day before, finishing 53 cents up at $96.62 a barrel.