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European markets rally
Germany celebrates hitting 11,000; no not the air miles that Angela Merkel has acquired from this week’s global jet-setting peace talk efforts, but the new high on the DAX. This morning’s expectation-beating German quarterly GDP figure has helped drive the index to its highest levels ever. If German equity traders are worried about the possibility of a GREXIT they are doing a very good job of hiding it. The FTSE, never the most eager of equity markets to get into the party mood, has even joined the European charge higher.
Rolls-Royce shares have tumbled by over 3% after it reduced its profits guidance by 13%, and this is after an 8% fall the previous year. Both Anglo American – with a $3.9 billion write-down due to the collapse in commodity prices – and BHP Billiton, with its announcement that maintenance work would seriously damage its Australian Olympic dam output, should be lower. However, today’s better-than-expected Chinese new loans figures have shown that the red tape cutting from last year is beginning to free up the flow of cash to Chinese consumers. This boosted market sentiment towards the FTSE’s mining sector and enabled multi-billion dollar write-downs to be ignored.
Dow above 18,000
With European equities in a buoyant mood and the comfort of knowing that a long Presidents Day long weekend awaits, US traders head into the closing hours of the week continuing that theme, enabling the Dow Jones to trade above the 18,000 level.
The legacy of a reporting season that has undershot recent results has seen momentum in the US equity market falter, as concerns that the European wobbles will cross the Atlantic have increased. These last few days, however, might see a return to the more optimistic American investor mind-set.
Gold claws back losses
Brent crude has really stretched its legs today as it comfortably sits at the $61.50 level, and without the constant chatter from OPEC stating its willingness to meet any increased demand in the market oil prices have been able to bounce.
The last 48 hours have seen gold become oversold, and coupled with the support of the 100-day moving average the precious metal has managed to claw back some of the week’s losses.
Cables eyes $1.54
Following yesterday’s inflation report and accompanying comments from Mark Carney, GBP/USD continues to flirt with the $1.5400 level. The Bank of England’s more hawkish tones have added to the sentiment that a good bounce is well overdue.
As welcome as yesterday’s news of a ceasefire between Russia and the Ukraine was, a more meaningful bounce in EUR/USD will require Angela Merkel to address the more complicated issue of Greek debt and austerity.