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Daily View - 25th April...

A real rollercoaster ride yesterday, as morning business took us all the way down to the 5950 level before the US sentiment changed the atmosphere and up we shot. This was slightly odd as much of the actual news-flow yesterday was not of the best.

The overall European index worsened considerably with German, Spanish and Belgian numbers reversing recent growth expectations, and the European Central Bank is now coming under increasing pressure to react to the economic situation rather than the inflationary one.

The strength of the main indices across the globe would hence seem to fly in the face of 'common sense', but with many companies now giving on a historical basis, wonderful returns, and with interest rates probably on a medium to long-term downward spiral, the search for returns leads investors unerringly towards the shell-shocked parts of the equity markets.

Clients are hence buying heavily into the financial sector as the Royal Bank of Scotland rights issue sinks into trading psyche. Four days of selling since the announcement has left the stock looking very attractive, if you believe that the bank will get the sort of historical returns out of the cash injection that it has in the past. The problem is, of course, whether the continued worsening of credit worthiness of the mortgage book starts to filter into the corporate sector.

The trading range of the FTSE almost exactly matched the previous day's efforts, with the ultimate result also almost identical. The markets continue to wrestle with the 5970 to 6100 range.

Yesterday's action was an absolute boon to our clients who have not have been heavy sellers at anything above 6050. The fall down to 5950 brought out heavy profit-taking and then a strong reversal which many punters bought into. The net result was a lovely profit on the way down, and an even better one on the way up. We are still stuck just under the 6100 level this morning but the bulls seem to have the best of it at the moment. Every time we get up to this level and it seems as though the break-out is imminent, traders decide to run out of steam.

Gold and Oil have responded to the Dollar strength and retreated over the past few days (only a little in the case of oil but significantly in gold). There are considerable long positions still in many commodity markets and if the perception takes hold that the best has been seen, then we could well see some really alarming price action in the coming months.