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Tuesday, July 14, 2020

FTSE-100 set to start the new quarter with modest gains as world economic data improves

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The FTSE-100 Index was today set to open slightly higher as investors kick off the quarter against a backdrop of improving economic data around the world.

The blue chip index was set to gain 11 points at 6180 today, with Germany’s Dax up 40 at 12350 and the CAC40 in France up 11 at 4947, according to trading at CMC Markets.

Leicester’s lockdown, together with the second wave covid hits to states in the US, are expected to prevent too much exuberance in markets although shares do appear to be getting increasingly resilient to newsflow on the virus. Investors seem to be looking beyond the short term complications posed by the pandemic and focusing instead on the recovery ahead.

This afternoon sees the US Federal Reserve publish the minutes explaining its decisions on monetary policy in June. Chairman Jay Powell has been extremely doveish in his comments so far, stating he was concerned about the impact on the economy of covid for those at the bottom of the income scale. He has cautioned against reading too much into the improving economic data.

CMC’s Michael Hewson said: “Mr Powell has remained insistent that it’s too early to draw too many conclusions this early in the crisis insisting the strength of any recovery will largely depend on keeping virus cases in check, thoguh he did seem slightly more optimistic in his comments this week than he was at the June press conference.”

Closer to home, Europe sees PMI survey data for France, Germany and the UK although this is only the fuller versions of the “flash” PMI’s reported last week. They’ll be unchanged in France and Germany, but the UK may be upgraded as more data comes in on sectors reopening.

A slew of job loss announcements in the UK this week from easyJet, TM Lewin, John Lewis and easyJet may dent overall sentiment.

ITV investors may be heartened by Sony Pictures Television’s takeover of Eleven, maker of the Netflix show Sex Education. The deal highlights there is appetite to buy independent producers of the type ITV has been snapping up for years now.

The pound has held onto support levels at 1.2215 against the dollar although, as yesterday, a fall could send it down to May’s lows of 1.2075. “We need to see recovery back above the 1.2450 level to stabilise and open up the 1.2540 level and last week’s high,” CMC said.

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