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FTSE opts out of gains
Although off the lows, the FTSE 100 is opting out of a global move higher for a second consecutive day. A long weekend, pending euro election results and some Ukraine-related worries have combined to keep risk appetite at bay, while the less than stellar arrival of Saga on the London market has dampened sentiment as well.
On the stock front, the day has seen the return of some buying in AstraZeneca, following Blackrock’s call for détente between the two pharma firms that has given the boost to talk that discussions might restart sooner than anticipated. Meanwhile the rally in Tullow may have run its course if the oil firm cannot uncover some exciting news soon, after its latest exploration activities came up short.
US indices buoyed by housing data
The grind higher in US indices continues, with new home sales data providing the necessary rationale for Wall Street to rally. In part low volumes ahead of the long weekend have helped the levitation, with sessions this week being eerily quiet, but recent data has shifted investors cautiously back into ‘risk on’ mode, and things can’t be all bad when there are eurozone upgrades around too. Even Hewlett-Packard is rallying, as investors switch to a more positive mood and forgive the firm for its unforced error of releasing earnings earlier than planned. Expect a lot of back-slapping among the bulls if the S&P 500 does clear 1900 soon, as the bull market defies all expectations and continues to break into fresh ground.
Copper rises higher
Copper is the strong performer of the day, rising 0.9% as speculation builds that inventories will see a significant shortfall this year. Last year’s surplus in the market has arguably led to a degree of complacency, with broad expectations that the same situation would prevail in 2014. Inventories however are now dropping to 2008 levels, with Chinese demand once again the main culprit. Last year’s stock market rally took place with backdrop of a falling copper price. A rising one could give equity markets fresh upward impetus.
US crude is on the up once more and near to the highs for the week just above $104. However, $105 saw the commodity stumble in March and April, so over-eager traders should be cautious about jumping too late onto the bandwagon.
The euro has slumped to more than a three-month low against the US dollar, as a second day of strong US housing data gave the US currency another lift. It has been the dollar’s week, gaining against the euro, yen and Aussie dollar, but it is the euro that is commanding attention. Euro elections may make the eurozone situation a bit more exciting, while this morning’s IFO reading chimed with the strong selling of the euro that has been witnessed in recent sessions. Only now is EUR/USD flashing oversold readings, and there will always be some that think the ECB meeting will prove to be a substantial let down, as the bank fails to live up to expectations regarding policy changes.