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UK stock market commentary (March 01, 2013): Markets remain firm in face of further voter disenfranchisement

If there’s anything we can learn from the result of the Eastleigh by-election it’s that, rather like the Italian general election, voters are disenchanted with mainstream political parties. It’s unlikely that the success of the UKIP party is a protest about the austerity measures being imposed by the coalition, as it’s the smaller coalition party that’s managed to hold onto the seat, but it’s a clear indication that UK voters are becoming more disenfranchised with Europe. Our Dave’s recent speech on Europe doesn’t seem to have gone far enough to placate the sceptical feeling towards the EU and it will be interesting to see in a couple of year’s time at the next general election whether that protest vote is repeated.

Of course this by-election has had little effect on the markets and this morning we see the FTSE a little lower on the open at 6355. European markets might well have been lower than they are today if it wasn’t for US indices continuing to press higher and there are many people still sitting on the sidelines waiting for a bigger pullback before they jump in. Yesterday, despite posting a small decline of 20 points, the Dow still held onto the 14,000 level as it closed at 14,054. The little bit of profit taking can be put down to the uncertainty surrounding the sequester that’s due to kick in today. The US Senate voted to keep the current spending cuts in place, however investors don’t seem to be too concerned as the economic data being released of late continues to remain positive, with jobless claims dropping to 344,000 against estimates of 360,000.

There are still quite a few bearish clients out there that seem to hold a disbelief in the current strength in the equity markets. For them they will want to see the resistance levels around 6390/6400 hold as a break above here might pave the way for 6500. To the downside support is seen at 6300 & 6250.

The European Central Bank President Mario Draghi held his ground, reiterating his opposition to tightening the current monetary policy for the foreseeable future. That pushed investors out of the euro which dropped 83 pips to 1.3055 amid ongoing political rows in Italy where forming a government represents quite a challenge at the moment. This morning there are a few buyers of the single currency around as they push EUR/USD to 1.3095 at the time of writing. Support and resistance is seen at 1.3035 and 1.3130 respectively.

Gold closed down $17 bucks yesterday at $1579.1 and is holding steady around the $1580 mark this morning. The precious metal has suffered its biggest monthly decline in nine months and longest run of month on month declines in sixteen years. Physical buying in China is supporting its price but, a stronger greenback and investors’ lack of interest are taking their toll. Safe-haven inflows into the United States weighed on dollar-priced commodities and funds and investors continue to be attracted by the stock market in light of higher confidence levels in the world’s largest economy.

Despite growing signs that the US employment is rebounding, GDP data showed a weaker than initially anticipated growth of 0.1%. As a result, energy investors’ sentiment turned negative pushing the WTI crude prices $1.04 lower to $91.80 a barrel. A stronger greenback added some extra downside pressure for oil prices.