FTSE 100 late morning: "Crisis watchers in the eurozone will have their hands full"

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Category: The FTSE 100 Report

Published on Tuesday, 11 September 2012 11:34

Written by Will Peters

In mid-morning trading, the FTSE 100 (INDEXFTSE:UKX) is down 20 points, as investors remain nervous ahead of another busy week for markets.

"As if the excitement of last week, with the ECB meeting and non-farm payrolls on the schedule, wasn't enough, this week sees a calendar jam-packed with major events. Thus, we are seeing a second-consecutive day of quiet trading, as investors opt to sit on their hands and await developments," says Chris Beauchamp, Market Analyst at IG Index.

Beauchamp notes that a weak finish to US markets last night underscores how jittery markets are about this week's Fed meeting; it is an obvious cue for Ben Bernanke to launch some sort of easing programme, but nagging doubts persist that he too might opt to do nothing.

"Crisis watchers in the eurozone will have their hands full as tomorrow sees both the German court ruling on the ESM and a Dutch election. Both these events  could have major consequences for the rescue plans drawn up last week," says Beauchamp.

Meanwhile, Burberry illustrates the pitfalls of being the darling of global markets; a 17% slump in its share price this morning after it warned flat sales growth for the second quarter would push profits towards the lower end of expectations.

Over at ETX Capital Ishaq Siddiqi has pointed out that the Eurozone has given traders cause to hesitate:

"European financial markets are under pressure today, as hesitation before the German constitutional court ruling tomorrow and the Fed’s policy meeting on Thursday continues to build.
 
"Although market expectations are for a ruling in favour of the ESM by the German court and more stimulus by the Fed, investors are still uncertain of both outcomes given the mixed messages from Germany and its Bundesbank and worries that the Fed may again delay a response at Thursday’s meeting given that we have the US elections in November."
 
Throwing in further worries, Spain’s PM has so far refused to request an official bailout, delaying help from the ECB – the PM says the government there is analysing the ECB’s latest bond buying plan but investors are clearly losing their patience with the country, especially as it has around EUR20 billion worth of bonds to sell next month.
 
Looking ahead, nothing major out on the economic diary with only US trade balance data due. Markets on Wall Street are tipped to open a little higher after yesterday’s losses, however are likely to see similar hesitation by traders heading into the Fed’s meeting this Thursday. ETX Capital currently sees the DJIA up around 23 points and the S&P 500 up around two points.