FTSE opens flat as new trading week begins

The FTSE 100 opened fairly flat on Monday trading after falling 0.5% on Friday but the focus on trading will be on China and the start of the new US earnings season.

The US earnings season kicks off after the US session tonight with the traditional curtain opening reporter Alcoa being announced later tonight. As with each US earnings season, there is a large focus in Europe as to its success and failures as somewhat of a benchmark for global equity performance and so whilst Alcoa’s earnings is more likely to influence the performance of mining shares tomorrow, most investors will keep an eye open for US reporting season, which picks up steam with JP Morgan later this week.

Inflation data from China is also likely to play a role in individual stock performance today. China cut interest rates for a second time in two months recently in an effort to kick start slowing growth (note that China reports GDP on Friday morning), and the market will use any clues to ascertain the country’s appetite for further stimulus either directly or through further rate cuts. Chinese inflation fell more than expected to 2.2% last month from 3% in May, which gives the Peoples Bank of China (PBOC) further room for rate manoeuvring.

Keeping along the central bank theme, whilst we see the minutes from the latest FOMC meeting on Wednesday, the Chicago Federal Reserve Bank President Governor Charles Evans stated that the Fed should kick start a new round of bond purchases in a move to help bring down unemployment even at the risk of higher inflation.

There is a lack of European economic data due out this morning so traders could simply be going through the motions as the new trading week starts.

The FTSE 100 fell away from resistance at 5700 last week after multiple tests at this level and it remains important for the UK Index to close consistently above this level if UK blue chip stocks are likely to see further gains.