FTSE 100 is so boring, for now

After a wild couple of months during which global stockmarkets resembled Sylvester Stallone's up-and-down boxer Rocky Balboa, it's all gone quiet again. We're in the middle of third-quarter reporting season and, barring a few stinkers – Pearson, Burberry and Home Retail stand up – company results have been largely in line with forecasts, or at least not worryingly out of sync with the City. Volatility is back at more normal levels, too, but should we be relieved, or is something brewing?

Clearly, markets are less worried about a first rise in US interest rates for a decade than they were a month ago. While the Federal Reserve may still decide on a hike in December, the hot money is on the first quarter of 2016. According to the CME 30-Day Fed Fund futures price – it reflects the market's view on rate expectations – the probability of a hike in December is just 30%, rising to 40% the month after and 52% at the next meeting in March 2016.

Rate nerves have been soothed by bland US consumer spending, inflation and jobs data, and the International Monetary Fund recently cut US growth expectations for 2016 from 3% to 2.8%.

Of course, the spectre of a hard landing in China remains. It's currently the market's big fear, and official figures show GDP growth of 6.9% in the third quarter. That's the slowest since the financial crisis, and the true number is likely to be much less.

That in itself is not a huge concern in the scheme of things. Double-digit growth is unsustainable and China's segue from an investment to a consumption model is a necessary development. It's unlikely to be smooth, but companies will have to navigate short-term pain and adjust to more modest growth. And they will.

For now, however, traders are unperturbed, and key triggers of volatility are behaving. A look at the VIX - a measure of short-term volatility often referred to as the "fear index" – tells the story (see chart below). From a peak above 50 during the August crash, it's been below 20 for more than a fortnight. It had spent most of the previous six weeks above 20, the longest stretch since January 2012.

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And this period of calm is reflected in the relative lack of movement in the FTSE 100. Since the final throes of a spectacular 10% rally late September through early October, the blue chip index has traded an uncharacteristically tight 186-point range (see chart below).

Data from Sharepad.co.uk reveals 28 shares in the FTSE 100 are currently up or down 1% or less since 6 October, and more than half have moved no more than 2%. Biggest risers include Hargreaves Lansdown, forecast-beating ARM Holdings, and takeover target SABMiller. Wooden spoons go to Pearson, Burberry and Rolls-Royce on profit disappointments.

"With a sheer lack of news to stimulate investor appetite, it looks like equities will be stuck in the doldrums for some time to come," says Mike McCudden, head of derivatives at Interactive Investor. "Investors will remain on the sidelines while market direction remains too difficult to call."

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What's odd about this is that October has a reputation as a killer month for stocks. Yes, the fourth-quarter is historically profitable for investors – and bulls claim buying will accelerate in the run-up to New Year - but seven of the 10 largest one-day falls in market history have occurred in October, according to mathematician and Stockmarket Almanac author Stephen Eckett. Interestingly, however, the last trading day of October is statistically the strongest of the year. Put a note in the diary.

But there was little to get investors' juices bubbling on Thursday. Miners are sprinkled liberally among the best performers during the morning session ahead of the European Central Bank's (ECB) six-weekly meeting – Glencore is top of the tree. A jump of 4.3 percentage points in the October MNI business indicator for China versus the month before has clearly been taken well. It was the biggest improvement since March 2011, and Deutsche Bank reckons that supports its house view that China data will soon stabilise. We'll see.

And there's rare support for aerospace and automotive engineer GKN. Its motor-focused Driveline division did well in the third quarter, and despite a tough few months ahead, chief executive Nigel Stein still expects 2% organic growth this year. Trading on just 10 times forward earnings, traders think GKN looks cheap.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.