Pope Benedict XVI Resignation has little effect on the markets

<p>The surprising news on Monday morning that Pope Benedict XVI is to resign on 28 February left the markets relatively unmoved in the immediate aftermath. […]</p>

The surprising news on Monday morning that Pope Benedict XVI is to resign on 28 February left the markets relatively unmoved in the immediate aftermath.

There has not been a dramatic reaction in both equity markets or currencies to the surprising news. In truth the news is unlikely to have a dramatic impact in all honesty and the forewarning of the intention to resign on the 28th February gives investors time to digest the news. That said, one potential issue could be if there is an elongated process in electing a successor, which may change some of the more extreme investor mindsets in the short term.

Indeed, last time the Vatican elected a new Pope, the Italian Mib fell 5.7% so this does need to be watched, albeit marginally at this stage.

The FTSE 100 was trading at 6279 with a gain of 15pts whilst the Italian Mib fell over 0.4%. The euro gained against a basket of currencies including the yen, sterling and US dollar, with the EUR/USD rate trading at 1.3382.

In London trading, shares in supermarket retailers such as Tesco’s and Morrison rallied in trading on Monday as benchmark indices pushed tentatively higher.

Despite the horse meat scandal, shares in Tesco’s continue to outperform, with prices rallying 1% this morning after BNP Paribas raised their guidance to neutral from underperform. Shares hit a high on the day of 369.4p, its highest levels since the shocking profit warning issue just over a year ago sent shares tumbling. Morrisons shares also gained 1.84%.

ARM Holdings was a key faller in trading with investors looking to lock in their gains after share prices doubled in the space of just six months.

There is a lack of economic data out today but certainly a raft of important announcements needs to be watched as the week progresses. Tomorrow we have UK inflation data, where on an annual basis UK inflation is expected to increase to 2.8% from 2.7%. On Wednesday we also have the Bank of England’s quarterly inflation report where revisions to both inflation and growth need to be watched carefully.

US retail sales, due out on Wednesday, are also expected to slow to a small rise of 0.1% from 0.5%. Friday’s release of US industrial production and consumer sentiment will also help to give further clarity over the ability of the US economy to bounce back from a shocking contraction in Q4.

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