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

<p>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 […]</p>

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.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.