US markets led higher by European counterparts

Equity traders have started the week in optimistic mood ahead of Wednesday’s crucial data.

Looking around the screens, it is difficult to pinpoint exactly where today’s equity move has come from. The economic data released today has been unspectacular at best, and the news flow from companies was hardly impressive.

Although the Fed chairman Ben Bernanke stated that the economic strength of the US would be the factor dictating when quantitative easing would begin to wind down, the equity markets have certainly shown reluctance to respond to that to date. Since Mr Bernanke’s original speech on the matter on 22 May, the Dow has drifted lower by only 1.4%, while the FTSE has fallen by 6.5% over the same period. It would be fair to say that the US economy is considerably further down the road to recovery than most European countries and the UK.

The volume of equities traded has been poor over the last month, but even by these low standards the volumes are broadly only two thirds of that expected. We find ourselves in a confusing situation, where many are struggling to get to grips with market sentiment. We have even started to read bad news as good news, due to the likely implication that Mr Bernanke would be less inclined to turn off the taps. Patience is required, as all will become clearer come Wednesday evening.

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