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The Artists formerly known as King

Daily View - 15th May...

Mervyn King can hardly be described as much of an artist, although he did get his paint brush out yesterday, and proceeded to paint a rather messy picture of the state of the UK economy. As he mixed his colours on a pallet that seemed to have more red than anything else, one can be forgiven for thinking that this piece of work was called "A Recession is Nigh".

Growth has been forecast lower and inflation higher, facts that we are used to, but what the economists are now admitting is that previous projections were wrong. All this flies in the face of the government's economists who had forecast growth to be much higher.

The message is clear however from the Bank of England, that interest rates aren't coming down anytime soon, much to the disappointment of homeowners and first time buyers. Whilst many appreciate the Bank's core role of keeping inflation to within 1% of their target, it's obvious even to them that they are not going to be able to sustain this achievement..

The FTSE opened lower than our original call this morning, as the bears take control using the after-thought of the BOE's quarterly inflation report as an excuse to test recent lows around 6140. Clients remain bearish of the FTSE 100 overall, but today's dip has attracted a few buyers back into the market in the belief that this little uptrend has further to go.

The fact remains though, that since the small break-out at the beginning of May the market has traded sideways and the feeling is that there needs to be a real turn in the tide for the market to push on up a steep hill. The jury's still out as to whether this is a bear market bounce or a true end to the overall bear market. The answer to this will be down to how the banking stocks perform going forward as of recent they have been particularly sluggish, yet the FTSE overall has remained relatively resilient.

Retailers are feeling it a bit this morning after DSG International, (Dixons and Currys) announced a cut in their annual dividend and that they are due to close some stores following a drop in sales. With more disposable income going on petrol and food, it'll be a while before wages catch up again for consumers to be able to go and splash out on new TVs, cookers etc. With no British interest for football supporters in this year's Euro Championships as well, the future looks grim for electrical retailers amongst others.

The Euro is having a bounce following this morning's GDP data from Germany and France, currently trading at $1.5540.