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UK stock market commentary (October 30, 2012): Some rare good news gives FTSE a boost

Following earlier calls for the FTSE to open lower we reversed our quote as it looked like things might perk up on the open and they did, in fact even better than we had expected and the index is heading further north up some 40 points to 5835 catching a few clients off guard. A ream of news across the wires from both a marco and corporate point of view has given the bulls a little bit of a boost this morning.

Firstly, overnight saw the Bank of Japan continue its addiction to money printing by announcing QE9 after only a few weeks following QE8 in a desperate bid to prevent a recession. Unfortunately the world’s third biggest economy has suffered from a dearth of exports most recently as their relationship with their neighbour have been deteriorating somewhat and at the moment the Chinese are simply not buying Japanese goods. If ever there was an example of a central bank wedded to stimulus measures the BOJ is it and so others will be thinking if they can do it, so can I meaning that there’s every chance more stimulus could come from the BOE, ECB and Federal Reserve in the months and years to come.

The second piece of good news actually comes from Spain for once where their Q3 GDP was better than expected coming in at only -0.3% as opposed to the expected -0.4%. Despite all its woes most recently export data for Spain has been relatively surprising and this little release of GDP above expectations is getting the bulls rather excited. It acts as a reminder that Spain remains in a deep recession, although not as bad as previously thought, whilst at the same time puts the country back on the radar as investors attempt to second guess when the county might request a proper bailout. For now that date looks to have been pushed back and if it does come it may not be until 2013.

Finally, some good corporate earnings have also contributed to the FTSE’s bullish move this morning. BP has far exceeded expectations and other companies that have reported this morning such as Imperial Tobacco and Standard Chartered have also impressed investors.

Good news is rare in today’s market and so let the good times roll whilst they can!

In other markets the risk on rally is giving the euro a boost as well. Normally you would expect better than expected data from the eurozone to send the single currency lower as it would mean a bailout for Spain is less likely, but despite the better than expected GDP figure the Spanish are still expected to ask for financial assistance at some point which is keeping the euro well supported. This morning EUR/USD is at 1.2940 and near term support and resistance is seen at 1.2880/60/25 and 1.2960/90/1.3020 respectively.

Gold closed at $1709 yesterday and was heading towards its biggest decline since May after disappointing corporate earnings forced prompted investors to sell holdings to cover their losses. Trading volumes of gold are expected to be light over the next few days due to the storm chaos in the US as historically localised adverse weather conditions do not cause much price volatility. The main focus will be on wider reaching global events and the US non farm payrolls due out on Friday, which may be delayed due to the hurricane. The data released could influence the tight election between Obama and Romney and traditionally the precious metal has a knack for being resilient in political storms also.

Hurricane Sandy made landfall on the US East Coast around midnight with a number of oil refineries being shut down to avoid part of the damages. Although the super storm was seen as a bullish influence for oil products, crude itself has seen the market price moving down on a glut of supplies not yet refined. As a result the WTI crude prices plunged $1.10 to $85.24 and reached the lowest level for three months at $84.67 a barrel.