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It has been yet another positive session for European markets, with the German DAX hitting fresh all-time highs. The FTSE 100 has had a more cautious start, but found its feet as the morning went on and soared through the 6700 level. However, the UK blue-chip index is still lagging behind some of its continental and US equivalents. The FTSE is still around 1.5% below the May highs, whereas the S&P 500 and DAX are 7% above their equivalent levels. The relative underperformances by the mining sector and financials have caused some drag for the FTSE in recent months, but if US strength continues it can surely only be a matter of time before the UK index sets fresh highs for the year.
Another day, another all-time high for the Dow Jones. The opening on Wall Street saw the Dow push through the 16,000 level, giving a year-to-date performance of 22%. These are impressive gains by any normal measure, and it can be tempting to feel that a top cannot be too far away. Many fingers have been burnt this year trying to predict that major turning point. But for now at least, with an accommodative central bank, it appears that investors are more afraid of missing out on gains than of losing in any immediate downturn. Some would see this sort of psychology as warning enough that the enthusiasm is starting to get out of hand.
The US dollar has been under some pressure again today, ahead of this week’s Federal Reserve meeting. From the performance of stock markets, it is clear that investors have a risk-on attitude across the board at the moment. This has helped the likes of the euro and pound hit their best levels for a few weeks.
As investors embraced risk again today, it wasn’t surprising to see gold weaken, even relative to the US dollar. There continues to be little appetite for holding the metal, in the short term at least, with rallies proving only to be sustainable for brief periods. Conversely, oil is still finding some buyers in the low $90 a barrel region. Traders are taking the view that the recent correction from above $110 may have been overdone, and if there are continued signs of ongoing economic recovery this may well prove to be a floor.