Morning Call by Greg Secker

Yesterday, the FTSE 100 was 50.86 points lower at 4,671.34 by the close of the session. Weakness was shown in the heavyweight banks, miners, and oils, but defensive stocks were back in favor once again. Yesterday, the Dow Jones industrial average lost 96.28 points (or 1.03%) to 9,241.67. Yesterday, the S&P 500 index fell 12.77 points (or 1.27%) to 994.33. Yesterday, the Nasdaq Composite Index slid 22.51 points (or 1.13%) to close at 1,969.73. Investors were cautious as the US Federal Reserve two day monetary policy meeting got underway and also an unexpectedly large drop in wholesale inventories raised worries about an economic recovery. Further earnings reports are due this week from retailers Wal-Mart, JC Penney and Macy’s.

Britain’s bigger listed companies are forecast to pay out £8bn ($13bn) less in dividends this year as many seek to repair balance sheets that became overstretched before the credit crunch. According to Capita Registrars, the dividends received by shareholders in these groups fell 9$ to £28bn in the first half of 2009. Threadneedle Street’s latest growth and inflation forecasts published today are widely expected to be downbeat about the prospects for the UK economy, suggesting a weak recovery and the potential for further expansion of Quantitative Easing (QE). Also today’s jobless figures are due, there has been a worrying increase in jobless figures in recent months, and unless there is an indication of this easing there are concerns that this could rise to 3 million this year. However on a more positive note, the Department for Communities and Local Government (DCLG) found that UK house prices rose 1.6% in June on the previous month.

Cable at 1.6458 is drifting a little lower in early trade. The market now awaits the release of latest jobs data and BOE quarterly inflation report later this morning. Resistance levels are up around the 1.6520 and 1.6550 levels. The JPY has seen some further strength, USD/JPY down at 95.54 from 97.11, while EUR/JPY is down at 135.10 from around 135.80. With Asian stocks trading lower, the JPY is benefitting from a pickup in risk aversion. There is also some focus on today’s FOMC meet, the Fed is widely expected to affirm its commitment to an accommodative monetary policy i.e. to keep interest rates low. EUR/USD sits at 1.4135, just below yesterday’s close.

US crude oil dipped below the $70-a-barrel mark on Tuesday after cautious remarks from Opec, warned that sustaining prices at current levels would depend on “clearer signs of improvement in the global economy”. Today Gold is at 947.40 USD, Brent Crude is at 72.17 USD and Copper is currently at 275.20 USX.

Due for release today there are a variety of releases, GBP Jobless Claims Change (JUL), GBP average Earning Ex Bonus, Bank of England quarterly inflation report. In the Euro zone industrial production June expected +0.2% m/m. In the US, USD Federal Open Market Committee Interest Rate Decision and USD trade balance.