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FTSE flat in trading as banks weigh on mining gains

Article By: ,  Financial Analyst
February 14, 2011 5:18 PM

The FTSE 100 traded flat on Monday as early gains fell back on banking equities as the index hit resistance at 6091 yet again. The 6091 level is proving to be an unwanted hurdle for bull enthusiasts lately, with the FTSE 100 selling off after hitting this level on each of the four occasions the level has been reached so far this year. Until the FTSE can break through resistance at 6091 and then 6117, it is likely to remain locked in its current trading range.

Chinese imports rally miners
Strong Chinese imports that rose 51% in January compared to a year earlier has helped to reaffirm investor confidence that medium term metal demand remains strong despite the recent Chinese interest rate hikes. Any sort of evidence that reaffirms the Chinese growth story and strong metal demand has typically seen a bullish reaction from investors in mining companies and today’s reaction is no different. As a result of the Chinese data, we have seen miners such as Vedanta, Lonmin and Xstrata all gain ground.

Banks weigh
We have seen traders sell out of banking stocks this morning, which is weighing on the FTSE 100. In truth there is not real visible trigger for this except for the fact that perhaps with Barclays, RBS and Lloyds set to update the market over the next few weeks, traders have downsized some of their risk considering the largely mixed reports seen from major US banks.

FTSE running out of steam?
There is an argument to be had that perhaps the FTSE 100 index has outpaced wider global indices and as such its upside momentum could be waning whilst the S&P 500 and Dow Jones play catch up. The FTSE 100 is trading just 9.7% off its 2007 highs whilst the Dow Jones remains some 13.4% short and the S&P 500 is 15.6% off its respective 2007 high. Indeed the DAX continues to power ahead and trade just 9% short of its 07’ highs, though indeed much of this has been turbocharged by a strong export-led economic recovery. So there is an argument here to suggest that with the Dow Jones and S&P posting new weekly highs and the FTSE struggling to break through 6091, that perhaps the FTSE’s charge higher has run out of steam. Indeed bull enthusiasts are waiting to see if the FTSE 100 can break through the 6091 and 6117 levels before they are convinced that there is further upside to come

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