City Watch: UK market is taking its lead from Wall Street, says Mark Marshall

CHOOSING to ignore the crisis in the eurozone last week, the FTSE 100 index took its lead from a Wall Street buoyed by more encouraging jobs data.

The US reported a gain of 163,000 jobs in July, well ahead of more pessimistic forecasts, and this lifted the big mining stocks last Friday, with gains ranging up to 6% following a brighter outlook for metals. The FTSE 100 completed its best week since early June, rallying by 160 points as investors shrugged off the lack of positive news from the eurozone.

This surge has finally lifted the UK index through the top end of a trading range that has kept it in check for some four weeks, and the index is poised to make further highs, with 5850 in sight.

In the eurozone, the FTSE Eurofirst 300 also shrugged off a lack of action by the ECB to enjoy its ninth consecutive weekly gain. Much of this is due to a reassessment of the ECB’s position on support for countries like Spain and Italy and whether it would again buy short term government debt, although recent statements from Mario Draghi, the ECB president, fell short of the comprehensive support investors were hoping for, given that expectations were raised by Draghi himself ahead of last week’s policy meeting. Any such move, of course, needs the support of the Bundesbank, which yesterday, reaffirmed its opposition to the ECB buying government bonds on the secondary market, which it sees as redistribution of wealth among states, an action that has not been democratically authorised.

In the UK, meanwhile, half-year results are due this week from major insurers including Legal & General, Old Mutual, Aviva and Prudential.


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: : Mark Marshall is a stockbroker with Charles Stanley & Co

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