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The effects of yesterday’s Swiss National Bank action are still washing through the financial markets as currencies, equities and commodities all saw aggressive moves. The initial panic caused by this shock SNB decision slowly turned to optimism as equity markets took this as a further signal that the European Central Bank would embark on its own quantitative easing scheme in the near future.
As volatility has increased and the US markets are due for a long weekend, it will be interesting to see how resilient traders can be before the desire to reduce exposure and a 'risk-off' mind-set creeps in. Inflation figures are soon out for both eurozone nations and the US, and this could well instigate further moves as the inflation-denting effects of the low oil prices continue to be factored in. A sign of exactly how worried investors were yesterday was gold's move through its 200-day moving average and into overbought territory — an occurrence that has become increasingly rare over the last couple of years.
The legacy issues of the Gulf of Mexico continue to hang over BP but yesterday it took a turn for the better as US judges found in its favour, capping its fine for the Clean Water Act to $13.7 billion — considerably less than was initially ruled, allowsing the shares to stage a relief rally.
JD Sports has seen Christmas sales beat expectations by some 12% and is now convinced that current full-year targets will exceed the top-end of the range, currently £90 million in pre-tax profits.
With both WTI and Olie - Brent Crude having failed to hang onto the $50 level, the FTSE fallers list is again dominated by oil and energy companies while Sainsbury’s decision to change its auditors has helped it jump 5% as the highest climbing stock in the FTSE.
The Dow Jones has found it hard going this week as a fresh selloff yesterday saw another triple-digit fall as the index threatened to move into oversold territory. US markets will be shut on Monday for Martin Luther King Day and the prospect of a long weekend will come as welcome relief.
This week has seen the US banks begin to start reporting quarterly figures and hopes that historical indiscretions, and the regulatory fines that have accompanied them, are a thing of the past have not materialised. Not that the dollar needed to drum up fresh support, but events in Switzerland have triggered a fresh round of strength as the perceived strength in the US currency has seen renewed buying.
The dollar index has now increased by 15.6% in the last six months and is showing little sign of running out of momentum. Ahead of the open we expect the Dow Jones to start 52 points lower at 17,268.