Europe
European markets appear to be dusting themselves off from the sharp declines seen in the middle of the month with large gains to start the week. Stalled Greek bailout negotiations have left stocks below record highs but there was a bit more optimism on Monday with Athens seemingly having sidelined its trouble-making finance minister, Yanis Varoufakis.
If the Syriza-led government of Alexis Tsipras want to progress in negotiations and avoid default, it’s probably the right move to put its finance minister on the proverbial chopping block. After three months of attempting to reach a better deal for Greece and roll back austerity, Mr Varoufakis has only succeeded in frustrating creditors.
German markets led the way as the German Dax jumped over 1.5% with Volkswagen one of the best performers after it Chairman Ferdinand Piech stepped down.
The FTSE 100 marched to its highest level since the record high formed earlier this month, with HSBC (LONDON:HSBA) leading the way over talk of a UK retail bank spin-off, while house builders underperformed on news of The Labour Party’s planned shake-up of the property market.
Labour’s latest election pledge of a nice little freebie for first-time buyers may encourage those on the cusp of entering the property market, but house building shares trod a downward path on the prospect of rent-controls that could be a major deterrent for buy-to-let investors.
The rest of the banking sector, helped by improved US bank earnings in the first quarter, managed to brush off a report by Standard and Poor’s predicting record high charges in 2015 for banks over upcoming settlements including FX market-rigging.
US
The S&P 500 and Nasdaq Composite opened at fresh record highs on Monday ahead of Apple’s earnings report after the close and the latest two-day policy meeting of the Federal Reserve which begins tomorrow.
Whether the Nasdaq can hold onto its new highs rest largely on the reaction to what is expected to be another quarter of ground-moving profit and sales growth from Apple.
The iPhone is what determines whether Apple shares (NASDAQ:AAPL) move higher in the long run, but investors will be considering a number of factors for performance over the weeks ahead. Not least, the prospects of the recently launched Apple Watch, the strong dollar impact on foreign earnings, competition from Samsung (LONDON:0593xq)’s Galaxy S6 as well as updates to the capital allocation plan of the world’s most profitable company.
FX
The US dollar lost out to commodity currencies on Monday with the Norwegian krona and Canadian dollar getting a lift from higher oil prices while a surge in metal prices helped the Australian dollar.
The New Zealand dollar was an outperformer, correlating with gains from its regional partner the Aussie after pushing back through the neckline of a double bottom pattern at 0.76 on Monday.
Forecasts of a massive drop-off in Japanese retail sales hurt the Japanese yen which was lower against the dollar, pound and euro in anticipation of the data.
Commodities
Gold bounced back from its five-week low on Monday in a short-covering rally ahead of the Federal Reserve policy meeting this week. The precious metal came short of the $1190 handle having dropped beneath $1180 on Friday.
The fighting in Yemen coupled with the beginnings of what could be a slowdown in US production is keeping crude oil aloft close to its 2015 highs. Brent crude was the weaker of the two major contracts trading around breakeven while WTI traded as much as 1% higher ahead of API data on Tuesday.
Copper continued its three-day tear higher, approaching $2.80 per lb having traded at a one-month low of $2.65 on Thursday as Chinese government stimulus efforts appear to have had the effect of drawing down inventories in Shanghai.
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