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Investors have been treated to two triple-digit days in London, first down and then up, as markets try to keep up with the fast-changing situation in the Ukraine. Economic and corporate news has been largely ignored in the rush to buy back shares, as investors breathe a sigh of relief that Russia has, for now, decided to halt its march westward.
FTSE picks itself up
Today’s price action on the FTSE 100 has effectively nullified the losses we saw yesterday, as London’s premiere index picks itself up off the floor, dusts itself down and looks to recommence its journey higher. The strong open was solidified after a press conference from Russia’s president Vladimir Putin, which he conducted in his own unique style, speaking without notes and looking like a man who was in control of events (and knew it). Mr Putin seemed to hint that he was determined to avoid a military confrontation, and his calming words did much to reassure jittery markets. Thankfully for all concerned, the situation seems calmer than it did 24 hours ago.
Yesterday was a bad day for news, while today was a good day, and equipment rental firm Ashtead took full advantage enjoying a 12% rise in its shares after strong results. Momentum remains strong here but there is a commendable underlying business as well, with the US division doing particularly well. If past performance is any guide, the meteoric rise of the company may yet continue.
Meanwhile, silver miner Fresnillo found the atmosphere to be much less conducive and suffered a sharp drop early on in the session. Cost pressures afflict a number of miners, and with production this year expected to be flat investors may have to hang on grimly until 2015 for any improvement. In the meantime, the rather chunky valuation will probably continue to be chipped away.
S&P 500 breaks new ground
US markets were in similarly buoyant fashion today, building on their better finish last night to spring back. In the Dow Jones’s case this means the index is looking to challenge the high from Friday, while the S&P 500 has broken new ground once again. As with other global indices, economic news has taken a back seat – although the impact of last week’s testimony by Federal Reserve chairman Janet Yellen is still making itself felt to some degree, as it reassures investors that the Fed has not moved completely onto autopilot where tapering is concerned.
Bid talk is also enlivening the situation, as tobacco firm Lorillard becomes the subject of a potential takeover by Reynolds American. As the tobacco market shrinks around the world, consolidation becomes the order of the day, and Reynolds American is looking to boost its offering of e-cigarettes, where Lorillard enjoyed an early advantage. Lorillard shares gained strongly yesterday and are adding more today, but regulatory uncertainties could cap gains in the short term.
Gold fails to push through highs
Yesterday they shone, but today they wilt. Gold, silver and oil all dropped back in the wake of yesterday’s Ukraine-inspired gains, as tensions diminish in the region. Gold’s failure to push through yesterday’s highs and onto the next resistance level of $1360 will have disappointed many, and is indicative that the 2014 rally here has run its course for now. Wheat and corn have wilted too, as traders book some of the gains made yesterday, and fears about a possible disruption in supply diminish.
AUD receives a boost
Renewed risk appetite has put the fight back into USD/JPY, which has pushed back to the levels seen last Friday. The ending of military exercises on the Russian/Ukrainian border helped ease tensions, tempting traders out from the safe-haven yen. Elsewhere the Australian dollar received a modest boost versus its US counterpart after the Reserve Bank of Australia left rates unchanged, but with a declining trend on the hourly chart stretching back into last week, we could see AUD/USD testing 89 cents in short order.