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.
Miners move higer
It has been a day of bargain hunting in many FTSE names, with the top end of the index dominated by companies that have seen heavy losses during the week. Oil’s rebound today has set BP and Tullow Oil rallying, with the former helped significantly by legal developments in the US that have seen the firm’s potential liabilities significantly reduced.
With the fall in copper prices paused for now, miners have taken the chance to move higher, with Glencore leading the entire index after touching a record low this week. European indices continue to leave the FTSE in the dust however, with the DAX in particular capping a good week with further gains today, moving firmly back above 10,000 as the long-awaited European Central Bank meeting gets a day closer. Clearly the positioning in the market at present is for some form of action from the ECB, although whether it will be enough to satisfy traders is another question entirely.
With Greek elections taking place at the end of next week it promises to be another week of elevated volatility.
US consumer confidence at 11-year high
US indices are struggling to make tentative gains this afternoon after a torrid week that has not been made better by disappointment in US bank earnings reports.
US consumer prices last month underwent their largest drop since December 2008, making it likely that further declines in prices are on their way as the slump in oil continues to be factored in. The good implications this has for consumer spending (despite that abysmal retail sales number earlier in the week) were reinforced by an 11-year high in consumer confidence figures. At least therefore there is some good news for US indices, which have had a particular poor start to the year.
Oil prices staged something of a rebound during the course of the afternoon, helped on its way by cuts to the International Energy Agency’s non-OPEC production forecast. Its suggestion that the tide in the price slump is turning sounds optimistic, but production cuts were inevitable at some point along the line, even if they did not come from OPEC.
Meanwhile gold enjoyed further gains as the flight-to-safety crowd worked themselves up into a frenzy once again. With central banks keeping markets on the hop, traders have looked afresh at gold and its apparent stability.
US data boosts dollar
Hopes of ECB quantitative easing are clearly driving the euro further down against the dollar, while the jump in consumer confidence in the US gave the dollar yet another boost. The contrast between the eurozone and the US gets starker by the day.
Clearly a weaker euro will help in the short term to buy time for the eurozone, but it is no substitute for a solid recovery, and there is certainly no sign of that on the continent at present. The currency continues to pay the price for confusion during times of crisis, and with Greek elections looming there could be more pain in store.