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FTSE Higher but capped by 6200

Oil is up by more than 2% which is one of the key reasons for upside in equity indices this morning. Meanwhile copper futures continue to look soft, having lost almost 10% since mid-March

Miners on top again this morning despite the fact that copper trades at 7 year lows. The metal averaged $4670 per metric tonne in Q1 – that’s the lowest since the GFC and output growth remains steady.

Radical restructuring amongst some of the big mining names and asset selling in a bid to cut down debt are clearly the only real options for now– the weaker oil price has also helped in terms of cost savings but we expect to still see two sided volatility in the share prices in the coming months especially if base metals continue to diverge from the oil price upside.

Certainly data from Bank of America Merrill Lynch this morning would indicate that investors are not all that enamoured with European stocks with $0.7Bn in outflows over the past week, this amounts to  9 straight weeks of outflows. We can therefore assess this morning’s upside as little more than short covering ahead of the weekend.

Anglo American (+2.88%)
Glencore (+2.73%)
BHP Billiton (+2.52%)

German exports rose 1.30% m/m in February but garnered little reaction from the FX traders. The EURUSD has given up, at least momentarily, any attempts to grapple with the 1.15 level after the ECB minutes showed that most policymakers had voiced their desire to leave the door open for more easing.

We are facing the biggest two-week rally in the US sovereigns market since the beginning of the year with US  bond yields at 6-week lows on growth fears. FX volatility is on a rising path as the VIX spikes to a two-week high in the US.
Given that most expect little from the FOMC in terms of monetary tightening in the near term, it’s hard to see upside for the dollar.
Low inflation numbers make modest US bond returns respectable by historical standards. One of the biggest anomalies in the capital markets was that US Treasuries offer some of the highest real yields in the world: the US dollar is both the safety currency and the high yield one so we cannot rule a reversal of fortune for the greenback over the medium term.

As it stands the FTSE is once again pushing higher but the 6200 level looms large and impenetrable for the past number of days so I’m not overly excited until this level is well behind us.

BP (+1.81%) despite trading sideways with a bent to the downside all week, the stock has caught a small bid today as oil prices (Brent front month) push back through $40/bbl. The price would need to push towards 365p and through before the overall downtrend can be negated,

Burberry (+1.62%) cut to underperform by RBC yesterday and yet the stock adds to gains for a second day.

Standard Chartered (+2%)  Standard Chartered PLC, rated A1/BBB+/A+, announced a US dollar 10-year benchmark issue. Shares in Standard Chartered have fallen by 60% over the last year

Rolls Royce (+1.76%) Marine section in Norway set to cut 150 jobs..

The UK economy is definitely looking weaker. The latest UK manufacturing productivity figures were poor and today's contraction of output will only make them worse. The economy no more than ever relies heavily on the service sector for growth. The pound has relinquished the $1.41 level too.

We call the Dow higher to 17631 – 90 points up from yesterday’s close.