U.K. FTSE 100 finishes at 21 month high

The FTSE 100 finished at 5,645, up 24 points for the day and the highest level for 21 months as commodity stocks went higher on the weak dollar and Goldman Sachs predicted strong demand for raw materials. Ben Bernanke's statement that U.S. interest rates were likely to remain low for some time, has pressurised the dollar and driven commodity prices higher as their price in set in U.S. dollars.

Markets trade at highs and Contrarian Investor UK trims holdings

The DOW Industrials are currently up over 50 points, up for a seventh straight day, and trading at a 17month high. The FTSE 100 is up also up 38 points. Stocks are on the move up again amid optimism over the Federal Reserve sticking with its low interest rate stance for the foreseeable future and as expected, the Bank of England confirming that its Monetary Policy Committee voted unanimously in favour of keeping U.K. interest rates unchanged at its meeting earlier this month. Also, the U.S. Producer Price Index declined 0.6% in February, its largest drop in seven months. Taking out food and energy costs, the index gained 0.1%.  In the U.K., the number of people claiming unemployment benefits fell unexpectedly last month with those claiming Jobseeker's Allowance dropping by 32,300 to 1.59m in February, the biggest monthly fall since 1997 and against forecasts of a rise of 8,000. The jobless rate now stands at 7.8%. However, long-term unemployment, which includes those out of work for over a year, jumped by 61,000 to 687,000.

Finally commodity stocks were on the rise, Goldman Sachs issued a research note forecasting a surge in global demand. 

Against this background of euphoria, the traditional defensives (pharmaceuticals, tobacco and utilities) are being sold off. With over a week of daily rises, the stampede into the markets doesn't seem to be abating. Contrarian Investor U.K. is using this strength to sell more positions with the final tranche of Micron Technology and the Intel position bought yesterday being closed off this afternoon. The market may have more steam in it, but I am happy to hold some cash on the sidelines for now. As well as economic concerns, the Iranian Nuclear saga looks to be coming to a head and there is risk of an escalation of tension in the Middle East if Israel adopts a hard line, perhaps even risking Military action. As oil moves over $80, any such tension in the Middle East will push oil well over $100, which will undoubtedly stifle this muted global economic recovery. Then there are all the sovereign debt problems which are not going anywhere fast. Time to take a contrarian view, and move into a defensive stance for now.

New Intel position on rumours of earnings forecast revision

A long position in Intel Corp (INTC) was initiated yesterday as the company's shares moved up nearly 4% to $22. There has been speculation that Intel is preparing to pre-announce a positive upward revision of earnings for the current quarter and forecast for the remainder of 2010 on the sustained recovery in semiconductor demand. The company's Q1 earnings were scheduled for release on April 13th.

At the Q4 results, the company forecast Q1 revenue's of $9.7 billion, with potential upside of $400 million, with gross margin of 61%, plus or minus two points. Analysts estimate earnings of 37 cents on $9.79 billion in revenue with a top range forecast of 40 cents.