Equities continue their march higher with the FTSE posting their fifth daily gain in a row.  We’ve now put on 425 points or 10% since the close on Christmas Eve and last night’s close above 4600 was a good sign for the bulls. 

The important thing to note, though, is that despite the broader index’s rise some stocks have performed spectacularly poorly and one in particular is Lloyds shares who were one of the biggest fallers yesterday dropping over 5%.  As the index has rallied you would expect it to be driven largely by the good old blue chips, but since this has not been the case it makes stock picking all the more important.  Time and time again we hear comments such as “picking your stocks carefully will be of paramount importance throughout 2009” and at the moment you can see why.  Whilst there may be many a bargain out there at the moment, investors should tread carefully and look for companies with solid balance sheets if they want to buy some shares.

Further indications of light at the end of the tunnel are how some stocks are moving in a counter intuitive way.  Take the retailers yesterday, for example, who’ve had a dire last few months and many of them look to be staring down the barrel, but some posted big gains in the session.  Often fund managers who call themselves ‘contrarian’ are incredibly successful with their strategy and it would seem that a lot of these contrarian investors believe it is now time for retail stocks to recover since everything about them seems to be disastrous.

M&S this morning is higher following its trading statement and news that losses were not as bad as expected.  A greater number of job losses and aggressive cutbacks at their Simply Food stores also give investors a glimmer of hope that drastic action is being taken to turn their fortunes around.  So this morning sees a little froth being taken off the top with the FTSE down a meagre 20 points but holding onto the 4600 level at the moment.  Miners, who have contributed to much of the last few days rises are the ones suffering from the selling this morning and interestingly the more defensive sectors are also leading the decline with utilities being badly hit. 

The minutes from the last Federal Reserve meeting revealed their concern over the outlook for the US economy, citing that there are still considerable risks to any recovery.  Whilst the dollar spend most of the day recovery against the euro to around 1.3310, the euro pulled back somewhat to 1.3510 and has strengthened is early London trade so currently it’s at 1.3590 and whilst 1.3415 remains support, the next upside target for the euro is 1.3650.

Sterling had another good day against the euro nearly touching 0.9000 at one point yesterday, but this morning’s trading is favouring the euro so far as we’re back at 0.9100.

The euro’s gain in the final moments of trading last night allowed gold to have a good rally back to over $860.  If $873 is taken out then this could pave the way for another test of $890 and then onto $900.  For those who are bullish of the euro (i.e. dollar bearish) then taking a long position in gold could pay off but for the moment the trend is still downward for the precious metal unless we take out $930.