European markets enjoyed solid gains on Thursday as Mideast calm has seen traders put risk back on the table. Equities were in demand whilst safe havens such as gold and the Japanese Yen traded on the back foot. Wall Street pushed higher on the open with the Dow reaching a record high.
Dax to 13600?
The German DAX led the charge northwards, rallying an impressive 1.5%, pushing to close comfortably beyond the key psychological level of 13500. The swift advance has brought the Dax’s all-time high of 13600 squarely back into view. Stronger than forecast German industrial production figures have helped buoy sentiment, particularly after yesterday’s dismal German factory orders data. The upbeat data combined with ebbing tensions in the Middle East and the expected signing of a phase one US – China trade deal next week has given Dax bulls plenty to cheer. It is a question of when not if the Dax will reach a fresh all time high. The answer is looking to be sooner rather than later.
Whilst the Dax bulls flirted with the all-time high the FTSE was looking decidedly less enthusiastic. The UK FTSE advanced a more subdued 0.5% across the session, piercing 7600 amid weaker oil prices and a softer pound.
Dovish Carney Drags Pound Lower
Sterling tumbled in early trade and failed to regain composure after BoE’s Mark Carney hinted that more stimulus could be on the cards. There have been two MPC dissenters for the past few meetings, suggesting that a rate cut was going to be more likely than a rate rise as BoE’s next move. However, this is the strongest hint to date from Mark Carney that a cut could be coming.
The BoE Governor’s comments came as concerns over EU – UK trade talks also weigh on the pound. Traders are growing doubtful as to whether a deal will be reached by the end of the transition period.
The pound slipped through $1.31 and is finding support at $1.3050.
Marks & Spencer Drops 10%
Retailers were the central focus on the FTSE. Whilst Tesco PLC (LON:TSCO) outperformed its peers, a trading update from Marks and Spencer's (LON:MKS) showed that the clothing and home department remains a key cause for concern. Same store sales showed an improvement from last year but were still woefully weak, declining a worse than expected -1.7%. The turnaround in the struggling clothes area of the business has been frustratingly slow. Whilst the food business continues to do well, investors are losing patience. Marks and Spencer’s plunged 10%.
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