FTSE meanders, waiting for new direction

Shares were treading water in morning deals as investors weighed concerns about sovereign risk, new bank rules and the economic outlook against a mixed outlook for companies.

The FTSE was 7.7 points lower at 5486.4 with heavyweight miners and oil groups mostly lower, reflecting concerns about the economic outlook 

The DJIA closed just 28 points higher at 10415 overnight and is expected to make only modest single digit gains in opening deals.

Global equity markets closed at four month highs yesterday and are more or less where they started the year, but remain well above highs earlier in the year.

Citigroup strategist Jonathan Stubbs said that investors are weighing mixed macroeconomic data against strong company profits and attractive valuations.

Like others he thinks there are still reasons to buy shares, saying 'easing macro trends suggest earnings estimates are too high. But this looks more than priced into markets.'

He repeated his FTSE 100 target of 6000 for the end of the year.

Data showing producer prices fell back in August suggest the Bank of England will be in no rush to lift interest rates.

Jonathan Loynes, economist at Capital Economics, said: 'the fact that pipeline cost pressures now seem to be easing somewhat should provide the MPC with further reassurance that CPI inflation will be back below its target at its 2 to 3 year policy horizon.'

In company news, banks were gaining ground as Sunday's announcement from the Bank for International Settlements on new capital rules is expected to show the UK banks have more than enough laid aside and some suggest the announcement could be a catalyst for the shares to go higher.

Citigroup repeated its 'buy' view on Lloyds and lifted its stance on RBS to 'buy' from 'hold'. The pair added 1.09p to 75.74p and 0.74p to 48.89p