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UK stock market commentary (January 24, 2013): Markets remain around highs but struggle to break to the upside

Our Dave’s speech on Europe has received some mixed press this morning and unsurprisingly so since the issue has always tended to split the country pretty much down the middle. However, if you asked a random sample of 1000 people if they’d like to see more powers repatriated from the EU to the UK you’d probably get near to everyone saying they would. The speech was well delivered and similar to most cases short of detail in terms of what powers the Prime Minister would try to bring back from Europe. The markets were largely unaffected by the speech as well and this too came as little surprise since any referendum, if it does materialise, is dependent on an unlikely Tory majority at the next election, and even then won’t be until 2017 by which stage it is likely to have been watered down significantly or changed from an in/out vote altogether.

Dave will now face many of his European counterparts in Davos today where the reception to his speech was also quite mixed with many reactions from the staunch euro-enthusiasts naturally saying that members can’t pick and choose what they like and don’t like about the EU project. Quite understandable as there are other members who would love to take the same stance and repatriate many powers and considering the quagmire that is the EU when it comes to decision making, such negotiations would be painful and desperately drawn out.

None of this put off the bulls in the US overnight as investors across the pond were cheered by US lawmakers voting to suspend the federal debt limit temporarily which has meant some time has been bought as opposed to having to deal with the spending cut issue and debt ceiling at the same time. There were also good earnings from Google and IBM which helped to send the Dow higher to 13,780, a rise of 70 points for the session. On the other hand, Apple missed its forecast sparking a sharp selloff in overnight trading which has meant that European indices are a little mixed on the open.

At the time of writing the FTSE is trading at 6200 and clients remain short overall still holding out for a more substantial retracement. As yet such a sell off has failed to materialise and if the rally continues it will be interesting to see if clients continue to oppose the strength.

The euro fell around 0.2% yesterday versus the dollar and is currently trading at 1.3315 after this morning’s German manufacturing PMI survey beat expectations showing activity shrank less than expected in January. In addition the dollar has fallen from a one-week high against the euro as the Federal debt ceiling was temporarily suspended increasing investor's appetite for higher yielding assets.

Gold closed at $1684.1 yesterday, descending from the one month high it reached earlier in the week. This morning it is inching down as the global recovery has made riskier assets more attractive and so money pours into assets such as equities and takes the safe haven shine off the precious metal. Investors are now being cautious as they wait for a Fed meeting next week to discuss future monetary policy and many feel as long as there isn't too much tightening, gold isn't likely to fall much in the short term.

Concerns about the potential glut at Cushing, Oklahoma delivery point, given the limited capacity of Seaway pipeline, triggered a steep selloff in crude prices yesterday. Meanwhile, the International Monetary Fund cut the global economic growth forecast which also sent energy investors to the exit. Consequently the WTI crude prices lost $1.13 to $95.52.