FTSE 100: Rally Comes To An Abrupt Halt

It’s been a long week for traders in London, one in which they saw the FTSE threaten to break an all time high after extending a 13 year record. However, as we have seen so often in recent times, the rally came to an unexpected and abrupt halt at the slightest sign of negativity and hesitation from the world's central banks.

The markets began the week in a positive mood after weakening of the Yen and monetary stimulus packages from central banks across the globe encouraged investors to withdraw their wealth from so called “safe assets” such as gold and place them into equities.

It wasn’t until midway through the week that the tables began to turn on investors when Ben Bernanke, the chairman of the Federal Reserve, let a comment slip about the possibility of quantitative easing being relaxed or even withdrawn completely if the US economy showed signs of long term economic stability and growth. Those comments were also supported by the minutes of the Federal Reserve meeting from the beginning of the month.

Should the US central bank remove its current policy of purchasing $85bn worth of bonds a month, it would seriously dent the air of confidence that has been filling the trading floors of exchanges around the world. The markets were unable to react to the comments on Wednesday due to the time of the comments but when the FTSE opened on Thursday it instantly declined from its 13 year high of 6840. The market closed the for the day with losses of 2.1 percent, its biggest one day decline in 52 weeks. Friday was an improvement but still saw declines of 0.6 percent as the FTSE shed 42.45 points.

With the markets now closed for the bank holiday weekend, investors will be left to ponder the situation until Tuesday morning rolls around. The opinion of analysts is split, with many feeling that the week ended with little more than market correction, while some feel this could be the beginning of consistent declines. We’ll take a look at what’s coming tomorrow in this week's edition of “The Advance”.

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