5th Straight Winning Close in Wall Street Sends Europe Higher
Europe has jumped higher out of the blocks on the last trading data of the week. The encouraging start comes following yet another impressive finish on Wall Street, which saw the Dow Jones close over 300 points higher, whilst the S&P added 1.2% and the Nasdaq 1.6%. This marked the 5th straight week of gains as the S&P is on pace for its best weekly performance in 4 years, whilst the Nasdaq last performed this strongly back in 2011.
US equities were on the rise despite bond yields also rising. This indicates that the market has quickly adjusted to the prospect of higher future inflation and a more hawkish Fed. Let’s not forget, the backdrop hasn’t changed, earning remain strong and company outlook’s encouraging. With strong fundamentals market participants were always going struggle to sit and let the pull back be anything more than buying opportunities.
Retail sales set to increase from disappointing December data
The central focus to trading this morning will be UK Retail sales due to be released at 09:30 GMT. Expectations are for retail sales to grow 2.4% year on year in January up from 1.3% in December. Meanwhile, on a monthly basis and increase of 0.6% is forecast after a decline of -1.5% in December after a particularly strong November thanks to Black Friday shopping.
The retail sales release comes hot on the heels of a more hawkish sounding BoE and following higher than anticipated inflation data. However, the BoE is going to struggle to raise interest rates if consumers are not spending. A strong reading could go some way to supporting the notion of a May rate hike.
GBP/USD to $1.42?
GBP/USD was seen consolidating gains overnight, after rallying strongly across the previous session, thanks to the weakening dollar. Moving towards the release GBP/USD is up 0.2% at $1.4130. Technically the pair will need to overcome resistance in the region of $1.4140 – 60 before extending gains back towards $1.42. On the downside a weaker reading could see the pair fall back towards $1.4100 before further selling could take the pair to $1.4070.
Over in the US Wall Street is showing signs of ending the week on a high. The markets still have a few pieces of influential data to contend with in the way of University of Michigan confidence, housing stats and Baker Hughes Rig count.
Oil looks nervously towards Baker Hughes Rig Count
Oil has experienced a solid recovery since dropping to a low of $58.20 on Wednesday. Concerns over increasing US shale production, in addition to a stronger dollar weighed on sentiment at the beginning of the week, also a weaker dollar and encouraging inventory data boosted the price in the later part the week. However, a high reading today could see those gains reversed.
Whilst OPEC has done a good job reining in production to boost oi prices since they fell to a nadir of below $30 per barrel in 2016, US shale producers could derail the recovery. The climbing price of oil is proving too tempting for US producers to ignore, so much so than there have been suggestions that the US could become the biggest oil producers in the world. Whilst that is not going to happen overnight, yet another strong increase in active rigs this week could mean that oil finished the week heading back towards $60 per barrel.
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