Citigroup results spark US market rally

Equity indices have performed yet another hand brake turn this afternoon, bouncing back after a dismal performance last week and aided by good news from Citigroup.

A man near the Citibank logo
Source: Bloomberg

M&A activity lifts FTSE

And so another stock market dip appears to have been consigned to the dustbin of history. On Bastille Day traders across the globe have displayed a little of the ardour that so animated those that stormed the infamous prison, while banishing any thoughts of beleaguered Portuguese banks to the back of their mind.

Shire’s coy dalliance with AbbVie has resulted in the UK firm agreeing to a takeover, and it seems that all concerned are quite contented with the outcome. The negotiations, conducted without the interference of politicians intent on making a name in defence of British industry, have been a model of what M&A should be.

In the world of smallcaps, Quindell has come out fighting with an early update designed to appease even the most sceptical – an aim that seems to have been amply fulfilled following the 37% gain today.

US markets head higher

The AbbVie deal with Shire and strong results from Citigroup have acted as the default reason for the market rally, but in reality there was never much danger of a sell-off in US markets last week. Distance from Portugal and a willingness to wait until earnings season began in earnest saw to it that yet again no dip was too small to be bought. The ‘S&P 500 @ 2000’ banners have been dusted off, barely a week after they were put away.

Citigroup’s fine was swiftly ignored when quarterly figures came in ahead of expectations, with worries soothed by the smaller-than-expected size of the punishment. If earnings continue to follow the lead set by Alcoa and Citigroup then the overall outlook seems much brighter.

Gold dives sharply

Gold has demonstrated its ability to confound the unwary, diving sharply towards $1300 today as reasons to cling on to the metal evaporated amid the risk-appetite revival. Crucially however, the rally of last week may have been doomed from the start as traders swung to extreme bullishness. With so much money behind this move higher the slump today may mark a general capitulation and another retest of $1280. It seems all the effort to get gold to $1340 was for nought.

Brent prices have stabilised above $107 today, but the drop back in the afternoon signals that there are still those willing to slap down any bullish traders. Any close below $107 leaves us looking nervously at $105.60.

Pound sheds gains

Mario Draghi becomes the latest central banker to appear before politicians, and like Janet Yellen and Mark Carney he will seek to be as pleasingly informative as possible while simultaneously keeping his cards very close to his chest. With Ms Yellen also testifying this week an unexpected calm has descended in EUR/USD.

The pound shed ground versus the dollar, but this trimming of longs will be short-lived if CPI figures from the UK tomorrow come in ahead of expectations. With unemployment figures due on Wednesday it looks to be a busy week all round for GBP/USD.

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.

Find articles by analysts

Een artikel zoeken

Form has failed to submit. Please contact IG directly.

  • Ik wens per e-mail informatie van IG Group bedrijven te ontvangen over handelsideeën en IG's producten en diensten.

Voor meer informatie over hoe wij uw gegevens mogelijk kunnen gebruiken, bekijkt u ons Privacy- en toegangsbeleid en onze privacy website.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.