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.
Tesco share price bounces back
Day three of the global growth scare sees indices struggling to hold their ground. Bonds have become the destination of choice once again as the equity bull market faces its most serious test in months. The danger is now that a hawkish set of Federal Reserve minutes, pointing to an earlier hike in rates, could easily put markets into a tailspin from which they could struggle to recover.
It’s a testament to how far Tesco has fallen that its three-day rise is being talked about in such glowing terms. Ultimately however, the share price is simply seeing a bounceback from the heavy beating witnessed in recent weeks. Memories of the profit warning are still fresh however, so we can expect the bearish sentiment to take hold again if the upcoming set of figures fails to live up to (admittedly low) expectations.
Positive outlook on Alcoa earnings
US indices are in no mood to rally this afternoon, as they push back to the lows seen last week. It is almost as if the job numbers last Friday didn’t happen, and job recovery or not if minutes this evening adopt a more hawkish tone then the way to further downside will be opened.
At least Alcoa’s earnings could provide reason for a positive frame of mind but at around 22 times earnings, the shares do not leave much room for negative surprises. Earnings season needs to step up and rescue equity markets, since all else seems to point to reasons for further selling.
Gold halted before $1220
It must be disappointing being an advocate of higher gold prices, given that each rally still seems to be used as an excuse to short the commodity once more. This morning’s push in the direction of $1220 has come to a juddering halt, with the price now sitting close to the lows of the day.
If Federal Open Market Committee minutes this evening tread, as has been the trend, towards the hawkish end of things then a retest of the Monday lows close to $1180 is eminently possible. There is still no respite for oil prices, which remain on course to breach multi-year lows barring any game-changing decision from OPEC.
USD/JPY no longer overbought
After two days of losses dollar bulls seem to have regained the upper hand in USD/JPY, defending the ¥108 level as if their lives depend on it. Having seen the currency pair work off its overbought condition over the past 48 hours, it now looks as if we could be about to witness the next move higher for the dollar, pushing through the October highs as the divergence between central bank policy in the US and Japan becomes ever more stark.