FTSE sees small losses as investors digest central bank decisions and Obama stimulus plan

The FTSE 100 saw minimal movement upon market opening on Friday as investors digested a somewhat aggressive but questionable Obama stimulus plan last night and actions from the ECB and BoE to keep rates on hold.

The FTSE 100 traded at 5344 within the first 45 minutes of trading on Friday morning, rising a minimal 0.2% on the day before slipping into negative territory. The UK Index however, outperformed broader European trade that saw both the DAX and CAC falling more sharply.

It was an action packed information day yesterday with the ECB decision to keep rates on hold and the subsequent dovish tone of the press conference with Jean Claude Trichet afterwards that took much focus. Whilst the market failed to gain any more clues from Fed Chairman Ben Bernanke as to the nature of the monetary road ahead, investors are likely to spend the day digesting the credibility and impact of Obama’s $447 billion stimulus plan to kick start the US labour market.

The measures announced were a combination of spending plans and tax cuts to business owners to encourage hiring. Considering the fact that consumer spending accounts for around 70% of US activity, a strong labour market will be crucial in both maintaining the US economic recovery and in strengthening growth. The initial market reaction to the jobs plan announced by the US President last night has been one of disappointment thus far, questioning whether the President will be able to gain enough support from Republicans to pass the proposal into legislation. In the end any opposition may help Obama to campaign that Republicans are not looking out for America’s best interests with an election year coming up. Of course, the market wants to see action now though, without political games and one fears that perhaps the jobs plan will be more about the latter than the former in the near term.

The miners were a key drag on the FTSE 100 in early trade however, as investors reacted to slowing inflation in China, which paves the way for a less hawkish monetary policy, but also a weaker than expected growth of industrial production. Chinese inflation eased to 6.2% for the year, when the market was expecting perhaps a sharper ease to 6.1%. Industrial production rose 13.5% last month compared to a year ago but this fell short of the 13.7% expected by most market participants. The miss is going to heighten fears that the Chinese economy, and therefore metal demand, is slowing. Rio Tinto and Xstrata shares both fell around 1% on the day and were key drags on the UK Index.

Eyes will now switch to the weekend meeting of the G7 to see if they can announce any positive measures that may help to calm investor fears that the global economic recovery is slipping. It is the eye on the G7 meeting, which starts today in Marseille, that is also likely helping to convince traders to square some positions ahead of the weekend.