This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
The FTSE 100’s charge back to its highs for the year continued unabated this afternoon, after another drop in US employment claims emboldened investors and sent the index firmly through 6600. After a few days languishing in the summer sun, investors seem to have recovered their summer optimism, with even a second day of testimony from Ben Bernanke being unable to keep their exuberance in check.
Retail sales allowed London to make some small gains in the morning, but overall investors seemed to be on tiptoes ahead of plenty of US data and earnings that would be likely to determine market direction for the rest of the week. Animal spirits have been held back of late, since the prospect of extended testimony from Federal Reserve chairman Mr Bernanke raised the possibility of some untoward comments hitting newswires. In the event, yesterday’s testimony was a damp squib and it doesn’t seem as if today’s will be much different. Bernanke has been assiduous in steering a careful course between hinting too strongly at one policy direction or another, looking to end his term in a quiet, unassuming fashion.
In the US bank earnings continue to come in strongly, with Morgan Stanley the latest financial titan to publish figures, and the bank will be able to toast a 66% jump in Q2 profits compared to last year. The big names have been riding high, showing that the US economy is moving ahead once again, with the fiscal cliff and sequester only distant memories. A good Philadelphia Federal Index reading, the highest since March 2011, combined with the latest jobless claims figure to produce an abundance of optimism, with the S&P 500 pushing above the high seen on 22 May, of 1687.18. We are in new territory once again, with, as yet, nothing looking able to drag Wall Street down again.
US crude has moved back to a level last encountered in March 2012, as investors buy the black commodity on signs that the US economy is building up a head of steam. Meanwhile gold looks to recover some of the ground lost yesterday; $1300 remains the stumbling block, having capped rallies since late June.
US dollar strength means that USD/JPY is now back above the Y100 again, with the American currency seemingly carrying all before it. 2013 may well be known as the year of the dollar, and investors can hardly be blamed for throwing themselves in the general direction of an economy that is showing real signs of health, especially when viewed against the moribund economies of Western Europe.