Positive US sentiment driving markets higher

US confidence has coerced a solid triple-digit climb from the FTSE and the majority of European equity indices, as the bulls have taken control of traders' risk appetite.

A NYSE trader
Source: Bloomberg

Tesco shares rise

The top movers list in the FTSE has been dominated by the food retailers as Tesco’s CEO Dave Lewis has done a considerably better job of calming market fears than his Sainsbury’s counterpart Mike Coupe managed yesterday. Tesco’s share price jump of over 13% over the day is maybe as much a reflection of how aggressively its shares have been treated over the last six months as it is of the optimism that today’s figures have generated.

In contrast, the selloff by over 4% in Marks & Spencer’s shares, following disappointing figures linked to delays to online deliveries in December, highlights how serious retail firms must be in meeting their online sales commitments.

Today’s Bank of England announcement on interest rates was a bit of a non-event, and having remained unchanged since February 2009 no one was expecting January to be the month for change.

The calm following the release of recent global economic data has given equities an opportunity to tick higher and retrace some of their losses from earlier in the week. Traders are only too aware that the current tranquillity could come crashing down with industrial production figures from the UK and Europe, along with US non-farm payroll figures and unemployment rate changes all pencilled in for release tomorrow.

Dow near 18,000

The Dow Jones has followed on from yesterday’s strong moves higher by adding 250 points during the first couple of hours trading. These moves have once again put the Dow within striking distance of the 18,000 level and US traders’ optimism is more naturally suited to setting higher highs than battling to hang onto support levels.

Last night’s patient Federal Open Market Committee comments have given the markets a sense of stability, in the knowledge that interest rate rises will materialise but only when the time is right.

It is not always the most accurate of indicators but yesterday’s better-than-expected ADP employment change figures have suggested that Fridays non-farm payrolls have it in them to beat expectations.

Gold's appeal dwindles

Buoyant equity markets have triggered a selloff in gold as the flustered mindset of traders has once again settled down; meaning the allure of the precious metal’s stability has waned.

During the last few months we have seldom seen oil too far from the headlines, but today appears to be one of those respite moments that has seen an upturn in both Brent crude and WTI, easing the nerves of energy traders. Squeezed oil prices are yet to hamper US fracking production as the latest oil export figures are the healthiest in twenty years.

EUR/USD below $1.180

The descent in EUR/USD has shown no sign of slowing today after breaking below $1.180. In a little less than a month 700 pips have been knocked off as the comparative strength of the US dollar has shown little sign of reversing. Following the moves of the last 24 hours currency traders are already looking to the $1.1630 region of support last seen almost a decade ago in October 2005.

Surprising no one, the Bank of England kept interest rates unchanged and left the asset purchase facility at £375 billion. This has done very little to slow the fall in GBP/USD as it continues its move to $1.500.

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