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Morning gains evaporate in Europe

The morning rally on the FTSE has evaporated as the day has gone on, while US markets have begun their mid-week session by erasing yesterday’s bounce.

Outside the London Stock Exchange
Source: Bloomberg

Ashtead rises after strong update

Yesterday’s heavy selling seemed to have been forgotten as the day started with small gains in the UK and Europe. Top of the list has been equipment firm Ashtead, gaining over 9% as the session wound down, as investors rushed to buy the shares following a suitably strong update.

ASOS was also on the march, after UK sales rose, as shorts hurried to close out their positions in the face of an apparent improvement in trading. However, the weaker international outlook confirms that this firm has yet to find the Midas touch where foreign markets are concerned.

No report today would be complete without a mention of Quindell, which saw its share price almost halve at one point, as the recently departed founder drastically cut his stake in the firm, sending a signal for many others to follow suit. The journey in Quindell has been a remarkable one, but it appears to be nearing an end.

US markets still struggling

US indices continue to struggle, as the usual mid-December slump wears on, although in the face of strong seasonality for markets in the second half of December this outbreak of bearishness seems to have a limited shelf-life.

Instead, traders are focused on the decline in commodity prices, which is hurting the energy sector, and the fact that a light economic calendar has left markets without much reason to keep moving higher. The time is not yet ripe for a final push into Christmas, so until that time comes the dip looks to have a bit more life left in it.

Gold unable to push higher

Oil prices can’t seem to catch a break at the moment. Proponents of stimulus programmes will have been disappointed by the European Central Bank’s failure to act last week, but the continuing fall in oil prices has excellent consequences for hard-pressed consumers. OPEC’s decision to slash its demand forecast is merely a reflection of what markets already know – that both supply and demand dynamics are fundamentally bearish.

A diminishing of Greek tensions today meant that gold ran out of friends and was unable to push on from the gains made yesterday. So long as the upside remains bounded by the $1240-$1250 zone the bounce seems to have run its course.

Euro traders await TLTRO announcement

US dollar weakness has been the principal driver this afternoon, allowing the euro to attempt another move back above $1.24. However, these gains could be short-lived if the TLTRO announcement tomorrow proves to be disappointing. A poor take up will make itself felt in a weaker euro tomorrow as markets begin to price in an increased likelihood of QE from the ECB, with $1.20 increasingly looking like a realistic target.

An ongoing weakening of the ‘long dollar’ trade is also threatening to stymie Mario Draghi’s careful efforts to talk down the euro in his bid to weaken the currency without actually engaging in real monetary easing.  

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