European markets have benefited from a relief rally following the selloff that preceded the weekend’s referendum in Crimea. Today’s comments from the EU and US, stating that they have imposed travel bans and asset-freezes on officials from Russia and Ukraine, feel very much like a shot across the bows rather than the punitive measures Ukraine's citizens would have hoped for.
Housebuilders lead FTSE
Over the weekend, George Osborne spoke about his aim to extend the government's Help to Buy scheme all the way up until 2020. Subsequently the housebuilders have led the markets' move higher, with the likes of Bovis Homes, Barratt Developments and Persimmon all up over 3%.
Vodafone has been unable to resist the temptation to shop any longer, and has confirmed the €7.2 billion acquisition of Spanish cable operator Ono. Shares in the mobile-phone operator reacted well to the news that it had taken steps to further strengthen its European cable network.
The banks have also been in focus, with speculation that RBS might be able to offer a dividend providing the primary reason for optimism. With the yuan benefiting from the Chinese central bank's lighter touch, FTSE commodity stocks have rallied, helping equity markets eradicate some of last week’s losses.
Traders await FOMC statement
US industrial production figures are certainly not suffering a hangover from the first couple of months of poor US weather, as they beat expectations. Alibaba.com has joined the ever-growing list of companies embarking on an IPO on the US exchange. The Chinese online retailer is looking to raise $15 billion, but the IG grey market is already adding a considerable premium to the company’s perceived value. Unlike some of its predecessors this year, the company is profitable. Selling more goods than both Amazon and eBay, it is a sizable business with a track record to back it up. It will not be too long before US traders become more focused on the looming Federal Open Market Committiee statement due on Wednesday than the ongoing wrangling in Europe.
Coffee prices tumble
Having briefly tested confidence up over the $1390 level, gold has settled back down to $1378 while it waits to see if Black Sea developments warrant a fresh flight to security. Now that the rains have come, the price of coffee has finally tumbled. The droughts that South America was suffering had caused the price of arabica coffee to almost double, and farmers are still trying to gauge how much long-term damage has been done to this year’s crops.
EUR/USD bounces back
Following the release of the latest inflationary CPI figures, EUR/USD has again bounced back above the $1.3900 level. As EU inflation once more drops to 0.7%, renewed pressure will be placed on ECB president Mario Draghi to tackle this issue. USD/JPY has again found support overnight, as it drifted ever closer to the ¥101 region. USD/CAD has spent most of the last month drifting towards the 50-day moving average before once more being bounced higher, and this cycle looks set to continue.