FTSE closes down despite afternoon recovery

<p>The FTSE 100 recovered from losses of 0.5% to close slightly lower on the day, bouncing from a brief dip below the 5900 level after […]</p>

The FTSE 100 recovered from losses of 0.5% to close slightly lower on the day, bouncing from a brief dip below the 5900 level after positive session for heavyweight oil stocks helped the UK Index to regain lost territory.

The early losses have recovered well, though considering much of the recovery was helped by gains in oil stocks, which rose on stronger Crude prices, there may not have been too much to read into the turnaround in stock markets. Thanks to large cap oil firms listed in London, the FTSE 100 outperformed broader European Indices, with the CAC and DAX both slumping 0.4% and 0.9% on the day.

Key levels need to be broken 
We have key global indices at crucial levels and so the next few trading sessions could help to shape the near term outlook for stocks. With the Dow Jones and S+P both thus far failing to push above psychologically important 13,000 and 1360 levels respectively and the FTSE nearing the equally important 6000 level, we need to see Indices push on or we could see a small correction if investors start to reduce positions. That said, a small price correction could of course be healthy to maintain a longer term upward trend but nevertheless, failure at these levels could convince investors to close positions to protect themselves should Indices start to fall away.

Focus on global growth 
With Greece’s bailout confirmed, though admittedly last minute potential hiccups’ remain, the focus for investors’ returns to global growth prospects. Flash manufacturing data out of China showed the measure picked up but remained in contraction territory, and therefore, on the back of January’s first fall in imports and exports for more than two years, Chinese growth remains a crucial focal point for global stock markets and particularly European markets, considering its place as a major export partner of China.

Economic data disappoints
With focus switching to global growth, economic data is in most investor headlights and weaker than expected German and Eurozone manufacturing data out this morning has also aided the sell off in stocks somewhat for the morning session. German flash PMI fell more sharply than expected, to 50.1 from 51 when a growth to 51.5 was expected by most.

Equally Eurozone flash PMI also missed consensus, hitting 49.0 when a reading of 49.5 was expected and the important services sector section of the PMI fell in contraction territory of 49.4 when a marginal growth was expected. A surprising 1.9% jump in Eurozone industrial orders however helped to calm much of the manufacturing disappointment.

In the afternoon, weaker than expected US existing home sales data also kept traders on growth alert, with sales rising to 4.57m units from a downwardly revised 4.38m units previously, and this missed forecasts for a bigger rise to 4.65m units.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (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.