Indices largely unmoved as miners balance weak banking stocks – Japan ratings cut shrugged off

<p>Investors shrugged off any negative sentiment created by Standard & Poor’s decision to cut their credit rating on Japan to AA-minus, with Indices in Europe […]</p>

Investors shrugged off any negative sentiment created by Standard & Poor’s decision to cut their credit rating on Japan to AA-minus, with Indices in Europe largely trading near flat territory with price swings between small losses and gains.

We have seen a mildly positive real reaction from equity traders to last night’s FOMC decision, despite the cautious stance on the US’s economic recovery. That cautious stance is being translated by the market that they will continue to support the recovery with liquidity and so if there was any reaction to be had from the meeting, it is mostly being interpreted by investors as more upside than downside.

We have a crux of economic data out of the US today which is likely to be watched closely by European traders and will play a role in how the FTSE 100 and DAX finish the trading session. Durable Goods Orders, Pending Home Sales and Weekly Jobless data is enough to keep traders on their guard into the afternoon’s session.

The miners are the key sector keeping European indices, and the FTSE 100 in particular, afloat today with the sector charging higher by 1.2% chiefly on the back of 1.3% gains in the price of Copper and in line production figures from Kazakhmys. Gold miner Randgold Resources has also seen high buyer demand today after the firm received an upgrade from HSBC, who now have an overweight stance on its shares.

Mining strength, as it has historically been for some time now, is crucial to keeping the FTSE’s bullish edge and this is exemplified yet again today where mining strength is counter weighing weakness in banking stocks, which are lower in reaction to the ratings cut by the S&P on Japan. The cut has weighed on banking stocks in Europe today with Royal Bank of Scotland and Standard Chartered, the latter of which has large exposures to operations in Asia, both falling over 1%.

We have the Dow Jones and S&P 500 indices both at crucial psychological levels in the market of 12,000 and 1300 respectively. Both indices have failed to close above these levels yesterday and considering the strong correlations to European Indices, a push above these levels of resistance can be critical in allowing European markets to push on.

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