This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
DAX props up eurozone equities
The mining sector capitalised on the reduction in the reserve requirement ratio by the People’s Bank of China. Natural resource stocks have been under pressure lately as subdued metal prices have made them unpopular. Some funds have been flowing back into the mineral-related companies as investors feel there is value to be had, and the looser lending policy in China will stimulate some demand.
Eurozone equity markets are being elevated by the DAX which is leading the way following the Bundesbank update, in which the bank predicted private spending as the key to growth. Germany isn’t a good barometer for the region, but while the Germany economy is healthy it will prop up the rest of the currency union. Mario Draghi believes eurozone growth will pick up along with the inflation rate, but it will take time for the weak euro to take effect.
Morgan Stanley smashes earnings
The Dow Jones is up 220 points, at 18,045, and strong corporate earnings is propelling the market higher.
Morgan Stanley smashed estimates when the bank revealed its first-quarter numbers before the market opened. Trading revenue at the Wall Street titan jumped in the first three months of the year and easily exceeded analyst estimates. The bank is finally coming out the other side of the credit crisis now that legal costs, relating to mortgage-backed securities, are no longer eating into profits, and the impressive dealing earnings have put the spring back in its step.
Halliburton’s first-quarter figures have given traders high hopes for the oil industry as expectations were easily exceeded. Revenue may have declined in the quarter but the cost-cutting more than made up for it, and in order to get the green light from regulators to complete the Baker Hughes deal, more asset-stripping and disposals will be required. Halliburton had a good set of numbers when you consider how challenging the oil services sector has been.
Gold dips below $1200
Copper had a strong start to the session as the Chinese central bank loosened the countries lending policies, but Beijing’s plan backfired. Instead of gaining market confidence it had the opposite effect. Traders saw the large cut in the reserve requirement ratio as a sign that the largest importer of copper in the world is in more trouble than initially thought.
Gold is back below $1200 as stock markets soar, and William Dudley’s comments in relation to interest rates rising this year made matters worse for the metal. Gold doesn’t stray too far from the $1200 mark unless there is a large shift in traders risk attitude. The unresolved issue of Greece’s debt is the only reason gold hasn’t fallen further, and as long as Athens bounces from one crisis talk to another there will not be any serious shorting of gold.
Fed comments push dollar higher
The dollar is pushing higher after William Dudley of the Federal Reserve stated he was expecting a rate hike this year, but Mr Dudley conveniently left out when exactly the Fed would move away from rock bottom rates. The rate rise from the Fed in June isn’t off the table but it is looking unlikely, and the market is looking towards sometime between June and September.
The greenback is still king of the currency markets but it has slipped back a gear, and until the US moves away from the cold streak of economic indicators it won’t be powering ahead anytime soon. The euro is still being held back by Greece, and as long as the Greek central bank continue to be given a lifeline to emergency funding from the European Central Bank there won’t be a sharp decline in the currency.