Choppy trading sees FTSE flat to positive as US earnings pick up speed

Trading started with a choppy edge on Thursday, with the FTSE 100 remaining at key resistance levels whilst the majority of traders awaited a number of key US firms who are set to report their respective quarterly earnings to the market.

By 10.50am the FTSE 100 had rallied a mere seven points to trade at 5710 on the day, just short of the daily high of 5714, and lagging behind stronger gains in French stocks that helped the CAC to rally 0.7%, whilst the DAX matched the FTSE’s small rally.

If the FTSE can close higher, it would be the fourth consecutive day of gains and traders can take some muted confidence from the fact that investors have not sold out of major UK stocks aggressively thus far, despite the FTSE 100 trading at levels it has failed to surpass over the past four months.

The stubbornness of the FTSE 100 to maintain resistance levels shows a stubborn resistance amongst investors to cash in their recent gains and boost prospects that, should we see stronger-than-expected earnings from US firms today, UK stocks may receive a further push higher.

Major US earnings due out over the next 12 hours include Bank of America and Morgan Stanley before the start of the US market open, and Google, Intel and American Express after the US closing bell.

Sector wise, it has been UK banks that have been the engine behind the resilience of the FTSE 100 today, with the FTSE 350 banking sector rallying 3% on the day, its strongest daily gain since the start of November last year and helping the sector itself to hit a new two-and-a-half-month high.

Barclays, RBS and Lloyds have all seen 3%-4% gains in early trading as sentiment is boosted by optimism that the IMF may boost its lending resources to the EU to $1trillion and off the back of Goldman Sach’s much better-than-expected earnings yesterday, which has boosted hopes that Bank of America and Morgan Stanley may follow suit.

More successful bond auctions for both Spain and France have also helped investor sentiment. France auctioned just under €8billion, with falling yields, whilst Spain sold €6.61billion in longer term debt, higher than the €4.5billion targeted, with the longer term debt seeing falling yields and this kept stocks in positive mode in trading. Attention now focuses on deadlocked talks between Greece and private bond holders over potential haircuts on debt to help the indebted country avoid a default that most ratings agencies see as inevitable by the mere fact that bond holders must take a haircut in the first place.