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FTSE above 6800
The FTSE 100 has moved back to levels seen at the beginning of the session, as it once again acclimatises itself to being above 6800. European markets have sprinted higher as well, with the DAX staying fairly quiescent until the middle of the day and then pushing to a high for the month. Clearly the European Central Bank’s apparent conversion to the cause of QE is outweighing the weekend collapse of the French government, while a jump in US consumer confidence to its highest level since October 2007 provides yet more proof that it is America leading the way in economic terms.
Next shareholders will be breaking out the champagne today as the shares reached new all-time highs above £71, having returned over 300% since late August 2009 versus around 40% for the FTSE 100, and the recent upgrade to earnings expectations points to further good times ahead.
In UK political news Alex Salmond remains ebullient after his drubbing of Alistair Darling last night, but the IG binary bet still registers an 85% chance of a 'no' vote, indicating a bigger defeat for the independence motion than the polls are currently suggesting.
US markets look strong
US markets are back in strong form, building on the advances made yesterday. Merger fever has been added into the mix thanks to Burger King, but with the company trading on 30 times forward earnings versus 18 times for McDonald’s, much of the good news already seems included in the price.
The doom watchers will declare that these fresh all-time highs in the S&P 500 are merely the death throes of the rally, but the prospect of ECB QE has provided further rationale for investors to stick with this market, even if they are keeping one nervous eye on troop movements in the Ukraine.
Gold gains capped at 200-DMA
Gold’s brief spike towards $1290 has been defeated, with the metal shedding its gains for the day despite optimism that the ECB is on a path to fresh easing. With the 200-day moving average capping gains it seems the metal is still fated to continue its fall from the August highs around $1320.
Oil prices are enjoying a second day of gains, helped by the US confidence data that adds strength to the idea that the US economy is still roaring ahead, but the supply picture still points to a difficult period for crude prices.
GBP/USD remains oversold
The prospect of a new cabinet in France has done little to revive the euro, which remains broadly unchanged against the US dollar today. Should Mario Draghi follow up his speech with further moves in the direction of unconventional policy measures then we can expect more weakness in the euro and further declines in bond yields, mirroring the seemingly unstoppable decline in eurozone inflation.
The pound is off the lows of yesterday against the US dollar, but remains oversold, so until the daily relative strength index registers a move out of this condition traders waiting to double down on a weaker pound are likely to stay their hand.