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FTSE Flat as Investors Wait for Central Bank Moves

UK markets closed the day virtually unchanged from the previous trading session as investors wait for Bernanke (and his central bank buddies) to make the next move

Alanna Petroff 16 August, 2012 | 5:37PM

The placid market trend continues, with all major UK indices registering very little movement on Thursday.

At the close, the FTSE 100 index and the FTSE 250 index were both virtually unchanged from the previous trading session. The FTSE 100 is closed at 5,835 and the FTSE 250 is closed at 11, 502. The FTSE 100 underperformed other major European stock indices during the day.

The lack of volatility and lack of high-volume trading over the last few weeks is typical during the summer months in the UK when many investors and traders take time off to go on holidays. Still, over the past few weeks the indices have pushed up to their highest levels in the last five months.

“The low-volume rally is now almost two weeks old, so the question is now whether it can be sustained into the second half of August,” said Chris Beauchamp, a market analyst at IG Index.

Ultimately, it appears that investors are waiting for central banks to make the next move regarding decisions about further economic stimulus.

Investors are “wait[ing] patiently for the central banks to act or at least show some signs that they will act soon. The recent rally stemming from Mario Draghi's pledge to do “whatever it takes” has been short lived as traders are in a wait-and-see mood as to what the central banks will come up with and so there has not been much commitment to risk-on positions,” explains market analyst Fiona Cincotta from City Index.

“Comments from Chinese Premier Wen Jiabao that the country continues to face headwinds helped to increase near term expectations of further monetary policy action by China to counter this,” said Josua Raymond from City Index.  “This helped to increase investors attraction to heavyweight mining stocks today, which supported the FTSE 350 mining sector.”

Commenting on the current economic and market conditions, Morningstar OBSR’s director of investment, Peter Toogood, said: “The global economy appears to have subsided into a period of sub-par growth with little prospect of a return to above-trend over the near term, unless the Chinese economy rebounds vigorously ... Equity risks remain high, but economic and financial trends are resulting in coordinated policy responses from governments and central banks which should gradually encourage investors to rebuild equity weights in portfolios.” 

To see the day's winners & losers on the FTSE, take a look at Morningstar's Heat Map.

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About Author Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.