Cautious optimism edges equities higher

An encouraging Asian session has paved the way for cautious optimism in European equity markets.

Canary Wharf, London
Source: Bloomberg

Following the UK posting soft inflation figures, it is the turn of both the eurozone and the US to show their hands today. With Brent crude and US light oil trading below $50, the likelihood of any central bank seeing inflation up around the targeted 2% level any time soon looks wildly optimistic. Although the UK might be struggling to get inflation under control the drop in unemployment levels and the increase in average earnings does legitimise the debate.

With just over 24 hours to go before we hear from the FOMC, currency markets are reflecting a 28% chance that they will start raising rates in September. Much more likely will be a start date later in the year or early 2016, but the  FOMC will be conscious the currency markets’ patience could easily turn to frustration should they continue to tease traders.

With commodity prices enjoying some relative calm and Asian markets ticking higher, equity markets in Europe have started the day in a tentatively bullish mood. With a plethora of important US data due to be released over the next two days it is unlikely that over-optimism will set in as this will only encourage traders to reduce risk.

It has been a little while since one of the banks found themselves in the spotlight for all the wrong reasons, but RBS is back on the naughty step following its agreement to pay US regulators almost $130 million for the mis-selling of toxic mortgage-backed securities.

JD Sports Fashion certainly appears to be offering a style that resonates with many on the high street as the company has been able to post first-half sales up 82% year-on-year.

As far as investors are concerned a record high share price and booming sales will always be in fashion. The roller-coaster ride Glencore shareholders have been enduring of late shows little sign of levelling out and has started the sale of shares  accounting for 10% of those in issue.

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