MPC Minutes send Sterling higher !

MPC  minutes send Sterling Higher !

Yesterdays minutes showed the more positive economic outlook expressed by the MPC members at their most recent meeting. The minutes showed that the team had concluded that recent indicators were “consistent with a smaller contraction in GDP in the second quarter than it anticipated 2-months ago”. This makes tomorrow’s preliminary 2nd Quarter GDP release even more important for both interest rates and the currency. Today we are scheduled to get the next chapter in the consumer confidence saga with the publication of last month’s retail sales numbers. The ‘scribblers’ have gone for a small monthly rise which, if borne out, will likely leave markets un-moved. The danger of course is again on the disappointing side – we have seen so many false dawns over the past few months – that the old adage of ‘buy on the rumour, sell on the fact’ might very well prove to be the correct trading strategy.

The big mover overnight was the Yen which suffered all round on anticipation of the launch of a series of Toshin at the end of the week ie tomorrow. Toshin are Japanese domestic investment trusts which will invest in overseas assets and foreign currencies and estimates are for as much as $ 40 billion to be on offer. Such investment funds do not always gather the amount of funds that the offer allows, and sometimes the appetite for them falls well short. The market therefore, watches the uptake carefully for clues on the yen’s likely short term direction. There is no certainty as yet which assets the trusts will invest in but favourites appear to be a combination of traditional, mature markets such as the US and the UK as well as the perceived high yield and strong growth areas such as Brazil, Australia, Turkey and South Africa. It might be a difficult few hours for the Yen ……

Equities remain bubbly with the FTSE 100 showing its eighth straight positive trading day – the longest run since 1993 and Wall Street ending higher despite disappointing results yesterday from the financial institutions reporting. Traders were happy enough to remain positive after good numbers from Apple and Starbucks with the mood cemented in after-hours dealing by better than expected numbers from eBay. Can we make it another positive day? Well the retail sales figures will be important but a string of results from the US, more so. This afternoon we get 2nd Quarter earnings from such corporate stalwarts as Microsoft, Xerox and AT&T whilst great interest will centre upon the report from CIT Group, who have been going through such a trying time recently.

News overnight was quite sparse with the only real thing of note being the Brazil Central Bank cutting their official rates by 0.5% as expected.

Today we have little major economic news from either the Eurozone and from the US, just weekly jobless claims. So are left waiting for Central Bank comment/equity news for a clue to early direction. Scheduled speakers today are also few and far between with only the Fed’s Fischer due to address, with a speech on the economic outlook timetabled at 6.20 this evening.

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