FTSE falls 0 6 as US earnings season kicks off

The FTSE 100 fell 0.6% weighed down by selling in heavyweight commodity related stock sectors as the UK Index again failed to charge ahead of the 5700 resistance level.

Today has been much about the calm before the earnings storm and whilst investors await earnings details from Alcoa, who reports after the US closing bell tonight, we have seen some trader positioning ahead of the earnings calendar in the US. A lack of volumes also typifies the fact that traders are starting to take a leave of absence from the markets for the summer period, with normal volumes likely to return in September, unless we get a similarly volatile market like last August, when the US credit rating was downgraded.

The FTSE 100 is starting to look a little too much aligned with the traditional buy the rumour sell the fact scenario regarding Central Bank liquidity. Much of the recent rally was induced by expectations of the Bank of England injecting fresh stimulus into the market via asset purchases and so whilst that injection of £50bn was confirmed last week, the rally has started to run out of steam with investors struggling to look for the next element that may help to re-align the upwards trajectory in stocks from the last two weeks. Whilst it is hoped the US earnings season could provide the trigger for that, the only two companies of real note to report this week from the US is Alcoa tonight and JP Morgan on Friday. This may create somewhat of an earnings vacuum mid week.

So we can look to economic data in the interim to provide the main motivation for traders in the market.

Chinese inflation slowed more than expected last month to 2.2%, but whilst this was a faster fall than expected, it did not give enough confidence for investors to buy into mining stocks even though it could give China more room for easing in the near term if they wish to do so after cutting rates twice in two months last week.

Tomorrow see’s UK Industrial Production and Merchandise Trade figures released whilst later in the week we see the release of the minutes from the previous FOMC meeting on Wednesday, whilst data out of China continues to come in thick and fast with GDP released on Friday.