US markets see tentative gains as surge slows

UK and European markets are still positive as the session winds down, but for the US the surge witnessed on Tuesday has come to a gentle halt.

US flag
Source: Bloomberg

DAX moves above 8900

The 6400 level still remains something of a hurdle for the FTSE 100, even if this is currently more of a consolidation than the end of the jump higher that began last week.

GlaxoSmithKline results, which included an uplift to the full-year dividend, helped the market to hang on to its gains for the day, dispelling some of the gloom from British American Tobacco’s cautious update this morning. Firm reasons to buy have been lacking and given the magnitude of the upward move in recent sessions most traders are now asking themselves where the next positive catalyst is coming from. 

On the continent, the DAX’s move back above 8900 puts it firmly in bullish mode, and a weekly close above here would put additional upside towards 9100 into the frame once again.

Strong CPI results tempt buyers

Gains on Wall Street have been tentative at best, despite earnings reports from the likes of Boeing that struck a more positive tone than those released 24 hours early.

Yahoo is racing away after its well-received numbers last night, but for now a cautious mid-week pause is the order of the day. Even so, additional confident earnings numbers could still provide the basis for another move higher, with the S&P 500 still on course to challenge its long-term uptrend around the 1960 mark.

Ten-year Treasuries are still holding up around the 2.2% yield, although the slightly stronger CPI number will have tempted a few more buyers in on expectations that the Federal Reserve is still mulling a mid-2015 rate hike.

Brent could reach $88.20

What had seemed to be consolidation in the silver price has turned into a complete rout, with the price touching one-week lows. Traders took the opportunity presented by the touch of the July descending trendline as a textbook opportunity to sell the metal, presenting a stark contrast with gold, which has been buoyed by steady buying from Indian sources.

Hopes of Chinese demand are supporting Brent crude for a second day, which in the context of Brent’s heavy downward move is actually quite an impressive rally. We are now looking for further moves higher in the direction of $88.20.

Fed caution prevents drop in the pound

A fractionally stronger US CPI reading provided the breathing space the US dollar needed to make up some lost ground against the euro, pushing the single currency back and inadvertently doing the European Central Bank’s job for them.

Downside potential in GBP/USD has been ignited by a rather dovish set of Bank of England minutes that shows policymakers are becoming increasingly nervous that a rate hike in the middle of next year could be premature. Only the Fed’s apparently simultaneous shift to increased caution has prevented the pound from dropping below $1.60 once again. 

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.