We often highlight that by the time a news story hits the front page, the worst is over for its impact on capital markets. Wednesday proved no exception, the main story on the front page of the FT was the recent fall in the Dubai stock market we referred to yesterday, and true to form on Wednesday the Dubai general index rose 6%.
Elsewhere, the FTSE 100 continued its drift lower, as newspapers report that MP’s believe that Mark Carney is behaving like an “unreliable boyfriend” as he appears to keep changing his mind on interest rate policy.
It does feel a little like the pot calling the kettle black, as MP’s have a track record of changing their story to meet the mood at the time. It can’t do either side any good for there to be a public spat between the Governor of the Bank of England and members of Parliament. Mark Carney did have the benefit, unlike most Chief Exec’s as they move into the top job, to take over just as the global economy started to pick up. Having said that the policy measures that he has introduced does seem to have benefited the UK economy. Any sense that there is an uneasy relationship between the Bank of England and Parliament that could threaten Mark Carney’s position would undermine investor confidence.
The FTSE 100, as we also often point out, has traded in a tight range for over a year now. We are not chart followers for anything more than curiosity, but those who do follow charts; the one below may be of interest. The first support level traders will look for is the 200-day moving average and as one can see we are pretty close to that. Should that level be breached, the next target will be 6600, which is the bottom end of the year-long trading range.
One footnote to the failed attempt by Pfizer to buy AstraZeneca, according to Merrill Lynch, Non-financial US corporations have over $1.3tn of cash at their disposal held outside of the US. This represents nearly 9% of the S&P 500 Non-Financials market capitalisation. This Money is hard to repatriate due to international corporate tax rates. This would suggest that US corporates thirst for overseas acquisitions, as they look to gain a return on this capital, could continue for some time.