FTSE expected to dip as traders take some profits

The first 100-point gain for the FTSE 100 index on Friday since the start of the year is likely to prove too much of a temptation for those looking to bag some profits this morning, with the usual headaches still tormenting the markets: oil and the European debt crisis.

In out-of-hours trading, GFT is forecasting the UK blue-chip index to open down 22 points from last week’s close, at around 5,988. The German DAX is quoted to open down 27 points at 7,152 and the French CAC down 15 points at 4,039.

The surge made by equities at the end of the week came on the back of more positive economic data from the US, this time from the non-farm payrolls. The boost from the heavyweight US jobs number was a major boost to European stock markets, signalling to many we are witnessing a genuine recovery in the jobs market there. Nevertheless, the contrary side to the good news is that it may in fact be too good; enough perhaps even to bring about a premature ending by the Federal Reserve of its quantitative easing programme – currently scheduled to end in June – and maybe even flagging a potential rise in US interest rates later in the year.

With it seemingly only a matter of time before Portugal needs a bail-out, and Ireland revealing that it needs another €24bn (£21.2bn) for its banking system, Europe’s whole financial system is still perilously poised, yet the ECB is expected to raise interest rates for the first time in two years on Thursday, as inflationary pressures have continued to mount.

Crude oil is also set for another volatile week, starting near two year highs, with the conflict in Libya now looking increasingly likely to drag on longer than was originally expected, making it difficult to predict when oil exports can resume.

Martin Slaney is director of global dealing operations for GFT.