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The uneventful end to the weekend referendums in Ukraine and an upgrade to the mining sector from JPMorgan, have helped investors start the week in a sunnier frame of mind. While the more positive end to the US session on Friday is also helping markets to hold around their current levels.
Tensions in Ukraine have not gone away, but traders will be relieved that there has not been a sudden rush by any of the involved parties to praise or condemn the outcome. That might change over the coming days, but for now the quiet reaction has been gratefully received. The major question now is whether we can sustain these gains – earnings have failed to do it and dovish central bankers aren’t having the impact they once were. The search for a narrative to push us out of the current trading range goes on.
A fresh record high for the Dow Jones is an encouraging sign, but the real test of market appetite will be whether the index can close above 16,600 in the coming days. The short-term rally from the February lows remains intact, but the consistent inability of the index to finish above 16,600 is becoming something of a worrying sign. The below-par earnings season is the key element holding this market back, an indication that investors are still adjusting to a world of lower earnings growth.
Ahead of the open, we expect the Dow to start eight points higher at 16,591.