Europe
Equity markets in Europe are strong as the global political front appears to be improving, in that there has been no further developments regarding North Korea. The situation isn’t by any means resolved, but traders are taking their clues to buy as there hasn’t been any news negative news out of the region.
The FTSE 100 has bounced back today after its major decline on Friday. The British index came under pressure from the rally in the pound. Even though we have seen buying today, the benchmark is still below its 200-day moving average – an important barometer, and while it is south of that metric the outlook may remain negative.
Shares in BAE Systems (LON:BAES) were given a lift after the company revealed it has signed a letter of intent to sell 24 typhoon jets to Qatar for an undisclosed amount. The announcement pushed the share price to a level not seen since early August – when the company warned that its intelligence division would have to incur a restructuring charge. Goldman Sachs (NYSE:GS) put the stock on its conviction buy list due to a deal it signed with Saudi Arabia, and the share price has been pushing higher since then.
The bullish sentiment in European stock markets has prompted traders to take their cash out of traditional safe haven assets like gold and silver. The negative move in those markets has weighed on the share price of Randgold Resources (LON:RRS) and Fresnillo (LON:FRES).
US
The Dow Jones and the S&P 500 hit new record highs as the bullish run continues in the US. We saw a similar run of good fortune in the indices during the summer whereby new all-time highs were being reached every day, and now they have gotten their form back.
Even though the US is at the centre of North Korean stalemate, the American markets were never as badly hit as the Asian and European benchmarks were. The situation is still going on in the background, but should it flare up again, the US markets could weather the storm better than their European and Asian counterparts.
The Federal Reserve announcement on Wednesday will be keenly observed, and even though traders are not expecting any change to the interest rate, it is likely that we will hear details about when the Fed want to start unwinding the balance sheet.
FX
The EUR/USD is higher on the day and the single currency was helped along by firming up of eurozone inflation. CPI in the region pushed up to 1.5% - meeting expectations. It is still a long way off theEuropean Central Bank’s (ECB) 2% target, but at least it is heading in the right direction. Today’s data will add to the speculation the ECB will look to reign in their stimulus package, which may lead to a stronger euro.
The GBP/USD is down on the day as dealer’s book their profits from last week’s major rally. On Friday, the pound hit its highest level versus the US dollar since the UK’s EU referendum. The upward trend is still intact despite the pullback today.Mark Carney, the Governor of the Bank of England, is currently speaking in the US. Mr Carney started off his speech taking about ice hockey, but then moved onto the global economy. So far, he hasn’t mentioned British monetary policy, but volatility is likely to be high.
Commodities
Gold has dropped back to a level not seen in over two weeks as risk-on sentiment prevails. The metal hit a 13 month high on 8th of September, and has been declining since. The bearish momentum is increasing, and the metal could lose further ground in the coming days. Gold has been in a solid upward trend since July, and if we see it return to the $1300 region, we might see buyers enter the fold.
WTI and Brent Crude oil are lower due to profit taking. The energy market had a strong finish last week over concerns about lower supply and speculation that demand will increase. Saudi Arabia are taking about extending their output cut until the end of June 2018, whether they can convince their partners in OPEC remains to be seen. The chatter alone, could keep traders interested in the energy market.
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