STOXX 600 ON CONSOLIDATION BUT STERLING UNDER PRESSURE.

More than half of the STOXX 600 companies have reported so far in what has largely been a positive earnings season, with 73% of them topping profit expectations. The pan-European STOXX 600 indexes inched down 0.1%, with the German DAX falling 0.6% and UK’s FTSE 100 rising 0.5% after a long weekend. European shares inched lower on Tuesday as an early boost from commodity, bank and travel stocks was offset by losses in highly valued technology companies and automakers.

The UK seems to be moving through the gears on reigniting the engine of the economy without hitting a road bump.

Sterling dipped against the dollar on Tuesday with potential volatility expected by analysts ahead of Thursday’s Bank of England meeting and the Scottish parliamentary elections. The BoE is expected to announce tapering, or a reduction in the pace of its bond purchases at its meeting. However, Policy metrics will remain on hold with the need for on-going support maintained but what is approaching much faster is a decision on the pace of the asset purchase programme, where the BoE needs to begin paring back the pace of purchases if it is to remain within the year-end programme limit.

Meanwhile, the Scottish National Party (SNP) is expected to win a majority in the Scottish parliament, which some see as a risk for Britain. The SNP has pledged to call for a second Scottish independence referendum, although permission to do so will need to be granted by the UK government in London. This might have negative impact on sterling.

Sterling was 0.3% lower to the dollar by 1446 GMT at $1.3863. Against the euro it rose 0.06% to 86.68 pence. Apparently, Speculators increased their net long positions on the pound this week.