David Cameron hints towards a good Q3 GDP number FTSE rises 6pts

The FTSE 100 endured a choppy trading session within a tight range as investors weighed up their next move after Tuesdays’ heavy losses.

The FTSE 100 closed higher by 6pts as gains in resources shares, which traders bought into looking for bargains, helped to counter weakness in financial stocks.

After such a big fall yesterday, naturally there is a cautious air of sentiment in the market. Traders are juxtaposed between looking for bargains and reducing risk, fearing a more aggressive move lower. Today’s trading session is a perfect example of this with some speculative bargain hunting into mining and oil stocks, which were a key area of weakness yesterday and further winding down of positions in banking shares, which have been a key support for the FTSE since July and are also set to report earnings next week. Positive data from China in the shape of the HSBC Flash PMI hitting a three month high of 49.1 and although the reading remained in contraction territory, it did help to inspire buyers in the miners, albeit on a short term basis.

PM Cameron hints towards strong GDP number
Data has been somewhat disappointing today also with UK factory orders falling surprisingly in October, with the order book falling to -23 from -8 when most expectations were for a reading of -6. This reading is a real disappointment today and puts serious question marks on whether UK manufacturing can help to lead the UK recovery.

The German Ifo business sentiment measure also fell surprisingly too to 100 from 101.4. Data from the US showed a larger than expected increase in new home sales, which rose 5.7%.

After the shockingly bad UK CBI data, the focus immediately switches to tomorrows third quarter GDP reading, where the Office of National Statistics should report that the UK has exited recession. In today’s Prime Minister Questions, David Cameron hinted that we could see a good number when referencing recent UK economic data by saying that “the good news will keep on coming.” The UK is expected to bounce back from a contraction of -0.4% in Q2 to growth of 0.6% in Q3.

Tomorrow’s reading is likely to play a hugely influential role in whether the Bank of England decides to increase asset purchases beyond £375bn when they meet on 8th November. The BoE is still expected to increase QE levels by between £25bn and £50bn next month but question marks have started to appear as to whether this will in fact happen in the next meeting given the previous BoE  MPC minutes which showed some members questions the timing of this and indeed Mervyn Kings speech last night also left a few question marks on timing.

A strong number tomorrow will be excellent news in the short term for the UK economy but likely reduce the vigour of the Bank of England to increase stimulus next month.