Europe leads market gains

Heading into the close and the FTSE 100 looks likely to finish unchanged, trailing in the wake of European markets that have rallied once again. 

Greek and EU flags
Source: Bloomberg

Europe leads market gains

Overall indices can be said to have had a good day. Last night’s close seemed to point to some ugly price action but markets in Europe have set the tone, storming back in fine fashion to end the day with good gains. For the FTSE, the same sad tale was played out once again, as big-name mining stocks took a hefty chunk out of the index and left it wallowing in the red for most of the day before a late move into positive territory. 

Many had expected the Greek election to unleash chaos on markets, but with the European Central Bank having launched quantitative easing and the impact of the new government in Athens being so difficult to quantify, it looks as if the default setting in Europe remains ‘buy on the dips’. Airlines populated the top two slots on the FTSE 100 today thanks to further bid activity in the sector. 

IAG’s latest bid for Aer Lingus seems to have more chance of taking off than its previous iterations, as the latter said it had noted the proposals instead of rejecting them out of hand. If Ryanair can be persuaded to accede then it looks as if IAG is about to get larger once again, justifying the surge in the share price that has hit seven-year highs of late. 

US markets start week slowly

An empty economic calendar and sparse earnings timetable for the day has meant that US markets have started the week in sluggish fashion. Friday’s action was quite unnerving for those with an optimistic appraisal of the situation, and while they are firmly off overnight lows both the Dow Jones and S&P 500 have not exactly responded with boundless enthusiasm to Europe’s gains. However, the crescendo of earnings season reaches its peak this week, as 27% of the S&P 500 announce earnings. Given the broad range of sectors from which this week’s numbers are drawn, we could either be on the cusp of a turnaround in earnings numbers and thus a significant market bounce, or further doom and gloom that could undermine the good feeling from last week’s ECB rally. 

OPEC triggers oil rebound

Oil prices have rebounded thanks to the magic of an OPEC comment, as secretary general of the organisation opined that a rebound may be in the making. Whether this is just kite-flying or he actually knows something is almost immaterial – it was sufficient to send the market higher.

It looks as if gold’s good run has come to an end, however, now that Mario Draghi’s plans are in the open. QE expectations generated an impressive run for the metal but unless the Fed turns dovish on Wednesday the party looks to have ended for now.

Euro rallies off record lows

Reports of the euro’s demise have been greatly exaggerated. Expectations that we would see the currency go into freefall were somewhat wide of the mark, as it rallied off fresh multi-year lows. The odd thing is that a Syriza victory had been widely expected, thus even with a greater margin of victory the actual result was not too much of a surprise.

The pound has also made gains ahead of UK growth figures tomorrow, as hopes rise that consumer spending will have picked up and given a boost to the UK’s economic performance. 

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.