Home sales data caps US market gains

Markets have posted small gains this afternoon, taking a pause after a generally buoyant few days for equity indices.

Wall Street sign
Source: Bloomberg

FTSE eyes 6880

The FTSE may have failed to close above 6800 yesterday but it looks set to manage it today. With 6800 behind it, all eyes will shift towards the 6880 stumbling block. Savvy investors have been buying on weakness for a number of weeks now, giving an increasing upward momentum that may finally see the breakout towards the magic 6900 area. 

EasyJet shares have been routed today, as it continues its shift from beating expectations to falling below them. It’s a similar story for Kingfisher, as everyone rushes to downgrade the stock following a poor update. At least Reed Elsevier is bursting higher, shooting to new all-time highs. 

US markets pause after gains

Earnings season has been going well, and jobless claims are down once again. If US markets seem underwhelmed by this, it’s probably just because they’re resting after posting days of new intraday highs. A drop in home sales kept gains in check too, but overall the positive feeling remains. The search for a reason for a correction goes on, and while everyone keeps looking, they’re missing the real story, namely the one that shows the markets don’t want to go down, yet.

Investors desert gold

Every day that stock markets go up seems to be another selling opportunity in gold. A sharp drop in jobless claims, to their lowest level in eight years will have added to the rationale to stay out of gold, combined with a touch of dollar buying as well. A test of the 200-day moving average looks like a very definite possibility, as investors desert gold for the more secure havens of stock markets, which at least have the benefit of being unidirectional at present.

Continuing falls in wheat and corn prices underscore how inflation continues to be the dog that doesn’t bark, and a drop in oil prices below $100 would be the sign that price growth should be seen as the least of the Federal Reserve’s worries. 

Sterling drops below $1.70

Sterling has been royally hit by dollar buying this afternoon, taking it back below the magic $1.70 level. These are the times when a rally is tested, but the fundamental logic behind a higher pound remains intact. All markets tend to revert to the mean, but in this case we’re seeing the first reversion to the 50-DMA in a number of weeks. Overall, this still seems like a dip rather than the start of a new trend.  

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