Vodafone on top
All of the signs are pointing to a general period of consolidation in equity markets, as the drift of recent days starts to turn into a modest pullback. Good news is thin on the ground, and the question ‘what next?’ is becoming louder and more insistent. Any pullback is going to be of short duration, however, so the pessimists need to be nimble in getting into and out of their short positions.
The former is gearing up for a big set of numbers tomorrow, with the theme likely to be retrenchment and caution in the face of declining sales. Store openings will be off the agenda and the dividend is unlikely to escape cuts, although holding it steady would at least generate a positive reaction in early trade tomorrow.
Investors eye Ukraine
It was a slow start for US indices, as the market’s perpetual motion machine continues to run down gently. Alibaba shares fell back from their pre-open high, but overall Jack Ma continues to do well in his promotion of China’s ‘Singles Day’ into a major selling opportunity. Alibaba’s performance is a good proxy for risk appetite at present, having rebounded from its post-IPO lows but, like the broader market now, the question is how the upward momentum can be sustained into the rest of the month.
Investors continue to keep an eye on Ukraine, where tensions are simmering once again, and an outbreak of violence here would certainly produce an outbreak of profit-taking on the overbought US indices.
Gold gains stall at $1155
Gains in commodity prices are painfully short-lived, with the strong dollar still doing its work to keep prices lower. If equity markets are back in ‘greed’ mode, commodities are certainly still stuck on ‘fear’. It is true that the balance has swung too far to the bearish side, but there is no sign as yet of a positive catalyst to take the strength out of the dollar and put it back into raw materials.
Gains in gold have stalled around $1155, with buyers still maintaining an interest in any dips towards $1150. Meanwhile Brent has failed to move above $83 for a second day, putting the emphasis back on to the downside below $82.
USD/JPY could push through ¥116
The latest leg higher in the apparently unstoppable dollar-yen rally has seen the currency pair push through ¥116 today. It feels like the currency pair is trading on thin air at present, especially on a day of lower US volumes and no vital macro data from either Japan or the US. This also looks like a trade that has everyone on one side of the boat, so the rush back, when it comes, is likely to be ugly.
Sterling watchers are bracing themselves for tomorrow’s data rush; good unemployment and wage numbers would provide relief to the battered pound, providing some short-term upside before the strong dollar reasserts itself.