European automotive sector drives equity indices higher

Federal Reserve chair Janet Yellen’s speech has inspired equities to rally into the weekend.

Janet Yellen
Source: Bloomberg
  • Janet Yellen’s comments increase chances of rate hike in 2015
  • Glencore shareholders now holding a 'penny stock'

Traders have decided enough is enough and the attractions of cheap European automotive shares outweigh the risks.

Renault, BMW and Peugeot are all up by more than 4.5% this morning while even Volkswagen has bounced by almost 2% in the first hour of trading. It will be interesting to see how long this perception of cheap investment opportunity has greater traction than the unlimited liability of regulatory and litigious costs.

Having finished yesterday below the £1 per share mark, Glencore has managed to get back to a three-figure share price, but investors who bought into the placing will be disappointed to learn that they are on the cusp of becoming owners of a penny stock.

Fed chair Janet Yellen spoke at a seminar last night on 'Inflation dynamics & monetary policy' in which she finally added a little more clarity as to where she stood. Equity markets have rallied following her comments that she still wanted to increase rates this year and that she had held her vote for change. This will ensure that FX markets continue to debate whether rates rise in 2015 or 2016.

Another central banker expected to direct market sentiment is Bundesbank president Jens Weidmann who is bookending the day with speeches at 8am and at 5.30pm (London time). Considering we have a new Greek government headed by Alexis Tsipras and the crises engulfing the German automotive industry he will have plenty to give his opinion on, but we shouldn’t expect too many hints about more ECB QE.

Ahead of the open, we expect the Dow Jones to start at 16,351, almost 150 points higher. 

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