FTSE pauses for breath ahead of Service data and tomorrow s BoE decision

“The FTSE 100 paused for breath on Wednesday with the UK Index falling back 12pts after three days of consecutive gains as investors awaited fresh service data and looked ahead to tomorrow’s Bank of England (BoE) decision.

The FTSE 100 has gained over 3% in the last three days on expectations of further asset purchases by the Bank of England and in interest rate cut by the European Central Bank. With US markets closed today for the 4th July holiday, volumes will likely think out as the day progresses and investors are looking ahead to see if both Central Banks now deliver on heightened expectations.

At 9am, we will see the attest release of UK services PMI data, which is expected to fall from 53.3 to 52.7. A weaker than expected reading could help lock in at least £50bn worth of increases in asset purchases by the BoE.

Focus will also maintain on Barclays this afternoon as former CEO Bob Diamond is questioned by MP’s at the Treasury Select Committee at 2pm. Of significant interest will be on hearing evidence b Diamond that the bank was instructed to lower its interbank lending rates by Paul Tucker at the Bank of England and/or senior ministers at Whitehall. This could potentially open up a systemic issue to new levels of coercion with significant political and Central Bank officials. 

Interestingly however, so much of the focus remains on Barclays despite confirmation that many other global banks are also under investigation. Over the last three days, Barclays shares has lost 15%, but RBS has lost 7% and many other banks, rumoured to be also under investigation have actually seen their share prices gain.

Tullow Oil shares fell 1.3% after a trading update that broadly met expectations. The oil explorer reported that it forecast 82,000 barrels of equivalent oil per day (BOEPD) and that it expected to report record half year revenues of $1.15bn. Tullow Oil’s shares price has rallied strongly in the last three days ahead of this trading update, and so investors have now used the update as an excuse the lock in some gains.”