FTSE will open higher but relief over Egypt may wane

A positive start is expected for stock markets this morning, continuing the relief rally that began on Friday when President Mubarak’s decision to stand down was announced.

GFT is quoting the FTSE 100 index to open up 15 points from Friday’s close, at a level of 6,077.

Elsewhere in Europe the German Dax is called up 23 points at 7,394, and the French CAC is quoted up 10 points to open at 4,111.

The news from Egypt has cleared some uncertainty for the markets, but the situation is still far from being resolved, with the path for a transition to democracy hardly a straightforward one, and after the initial relief we may see direction being led by the oil markets, with WTI and Brent crude oil futures having closely followed the timeline of events since the turmoil began. Interestingly, despite an initial dip on the news of Mubarak’s decision, front month Brent held up.

above the $100 level and indeed went on to rally to set the highest weekly closing price since September 2008 – indicative perhaps of a more-than-niggling concern of traders that the tensions still have potential to spread elsewhere in the Middle East.

Nevertheless, from a technical perspective, Friday’s close above 6,060 for the FTSE 100 was a significant level, and an open to the upside this morning will have the market on track to tackle the 6,090 target.

The market isn’t short of other events that could breathe life into them this week, notably the release of the Bank of England’s quarterly inflation report on Wednesday.

Friday’s above-consensus producer input price and factory gate inflation will have added to concerns that the UK’s inflation problem will spiral out of control, but we can expect to see some light shed by the report on which way the MPC is leaning.

Also watch out for Barclays’ full-year results due out tomorrow, with bonus levels no doubt making the headlines as pre-tax profits are forecast to have halved to around £5bn, down from £11.1bn a year ago.

Martin Slaney is director of GFT’s global dealing operations.