European equities build on gains

Heading into the close, stock markets in the UK and Europe are motoring ahead, while US markets seem to be shaking off the torpor of recent sessions.

City of London
Source: Bloomberg

Tullow Oil on top

The FTSE 100 continues to build on its gains, with increasing eurozone optimism helping to compensate for a degree of profit-taking in the mining sector following advances yesterday.

Although oil prices are shedding their morning profits, Tullow Oil continues to sit at the top of the leader board – thanks to broker upgrades – but even the optimistic tone painted regarding an expansion of low-cost operations has only put a dent in the steady downtrend witnessed this year. A further weakening of oil prices threatens to upset even this slightly better picture.

Meanwhile Royal Mail is rising ahead of half-year numbers tomorrow, although news of a possible pre-Christmas strike reminds markets that, while it might have a stock market ticker, Royal Mail still has some of the unfortunate characteristics of a state-owned entity.

European indices optimism infects US markets 

After days of moving at the pace of a snail, the S&P 500 has finally seen a move, heading back above 2045, as the US is infected with some of the optimism that has taken over European indices in the past 48 hours.

It still looks like Wall Street is in a consolidation phase, and it may be that Europe is taking over the baton in leading stock markets higher, having let its American cousins do the heavy lifting in the first part of the rally. Fresh intraday highs have brought out some more top callers and bubble warnings, but it has been distinctly unwise to call an end to this move higher.

Federal Open Market Committee minutes tomorrow might do more than just provide reason for a pause, but unless there is a nasty surprise in the records any dip should still continue to be seen as a buying opportunity.

Silver shies away from $16.40

Gold traders have something of a problem. It was a laudable achievement to get the metal back to $1200 after an abysmal few weeks, but the move came on a day when stock markets seemed to wake up again after a quiet period. Thus the metal was unable to hold on to $1200 during the afternoon session, with some early selling threatening to take it back towards $1180.

The same can be said of silver, which shied at the $16.40 fence for a second day in a row and refused to go near the July downtrend line from $21.50. Even with a sustained bounce that carries over into December, precious metals still have a distinctly bearish outlook to them.

Caution in EUR/USD trading

Signs of a heartbeat in the German economy gave a good lift to the euro, as the ZEW reading for November bounced back from the dire October figure. However, beyond the economic sentiment number there is still plenty to be concerned about, with the institute itself noting that the broader environment was still fragile.

One good number does not a strong economy make, and the overriding atmosphere of caution was evident in EUR/USD trading, with the pair unwilling to move much beyond $1.2530. The problem for the European Central Bank is that better economic news threatens to keep pushing up the euro, thereby undoing its clever policy of talking down the currency to boost the economy without doing very much.

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