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Financial Focus: 28th October 2010

US Quantitative Easing concerns lift dollar but weaken commodities;
FTSE falls sharply and may slide to 5400 in near future;
UK consumer confidence data expected to be sharply down for October;
UK house prices fall for the third month in four in October.

SHARES:
With the Fed rumoured to be limiting its QE package, the dollar’s upward reaction weakened commodities and caused a sharp fall in the FTSE. A late recovery in the US markets will help the FTSE on opening (IG Markets calling it up 36 points) but analysts feel that a general downward trend may prevail because of uncertainty in the UK and US QE measures. Investors are preparing for a slide to 5,400 in the coming days.

FOREX:
A short-term lift to the dollar may be muted as the Fed are likely to leave the door open to further QE measures, even if the rumours of reduced intervention are correct for the next round. Sterling, also supported by this week’s better-than-expected growth figures, remains capped by diminished risk demand.

GILTS:
UK bond prices may start mixed today as investors remain uncertain about how the recent economic data will affect the Bank of England’s decision on QE. Consumer confidence data for October (due overnight) is likely to show consumer confidence is sharply down over the government’s detailed austerity budget.

ENERGY:
Oil prices were close to $82 a barrel in today’s Asia trading, as weekly trading figures provided mixed messages about US crude demand. Analysts comment that oil has remained above $80 because of the expected US Quantitative Easing programme and a weaker dollar, so oil price movement may hinge on the measures announced by the Fed next week.

METALS:
Spot gold was edging slightly higher after dropping 1.1% Wednesday on US dollar strength. It was last up $1.10 at $1,326.10/oz. Phillip Futures said the next cue was likely to be weekly jobless claims data from U.S. at 1230 GMT with a better than expected result potentially putting gold under more pressure.

INDEX CLOSING PRICES:
DJIA: 11126.28 / -43.18 / -0.39%
Nasdaq: 2503.26 / +5.97 / +0.24%
S&P 500: 1182.45 / -3.19 / -0.27%
FTSE 100: 5646.02 / -61.28 / -1.07%
FTSE 250: 10827.28 / -113.44 / -1.04%
Nikkei 225: 9371.18 / -15.85 / -0.17%

FOREX PRICES AT 0350 GMT:
USD/JPY: 81.50 / -52 / -0.29%
EUR/USD: 1.3823 / -29 / +0.43%
GBP/USD: 1.5806 / -09 / +0.27%
EUR/GBP: 0.8745 / -48 / +0.16%

COMMODITY PRICES AT 0400 GMT:
Comex Gold: $1327.20 / +$4.60 / +0.3%
Brent Crude Oil: $83.22 / -$0.01 / 0.0%

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