Stress test relief to provide a lift to markets on open

AND the winner is...” direction for stocks this morning will be driven by the results of the European bank stress tests, which were released at 5pm on Friday, after European stock markets closed.

A grand total of eight banks failed the tests, but that number was well below the worst fears of some analysts who had pitched the possible failure rate at as many as fifteen.

GFT quotes two-way prices on stock indices around the clock, even when the underlying markets are closed. The FTSE 100 index is called to open up 18 points at 5,861. The German DAX is forecast to open up 23 points at 7,243, and the French CAC 40 is quoted to open up 14 points at 3,740.

So we can expect a relief bounce on the open this morning, as it was caution surrounding the impending stress test results which had kept stocks on the back foot on Friday.

Should sentiment want to instead focus on negatives however, we did have the latest news on UK housing from Rightmove released at the weekend, which show that asking prices fell for the first time this year in July, down 1.6 per cent from the previous month. Another sobering statement was that seven out of ten properties listed in 2011 remain up for sale.

The road ahead for traders this week is far from without additional hurdles. The on-going US debt ceiling showdown will continue to niggle the markets, although ultimately there still seems to be the belief that this is a political wrangle which will eventually sort itself out. Of more impact this week will likely be the realities of another slew of second quarter earnings from US heavyweights including Apple, Intel, IBM, Microsoft, Yahoo, Goldman Sachs, Bank of America, plus Dow components General Electric, Caterpillar and AT&T.

Trading in BSkyB has seen high volumes on CFDs and spreadbets since the hacking scandal first emerged, and traders will be digesting the latest developments from the weekend. We would expect BSkyB shares to open higher this morning, continuing in the momentum seen on Friday as investors play the “BP bounce”, in the belief that the share price represents overall good value following a short term blip, and that a deal either with News International or another bidder will still emerge at some stage.

Martin Slaney is director of global dealing operations for GFT.