Europe
European equity markets are broadly weaker today as volatility is low. The trading ranges have been small even though it has been a busy day for political news, it just hasn’t translated into large swings in stocks.
The FTSE 100 has just pushed the 7300 mark – a level which a significant support area over the summer. If the mark can’t be held, the London benchmark could head south again.
The DAX, is holding up well even though the federal election highlighted deep division in Germany. Angela Merkel’s party won the most seats, but it could be some time before we find out what sort of a coalition government is formed.
Tullow Oil (LON:TLW) is up 6.3% today after a legal dispute between Ghana and the Ivory Coast went in favour of the former and in turn has allowed the oil company to restart drilling. The territorial dispute between the two countries halted operations at one of Tullow’s projects, and now the greenlight has been given to pick up there they left off. The oil exploration company has suffered greatly due to the weak oil market and the suspension of operations off the coast of Ghana added to their woes. The stock hit its highest level in four months today. Momentum is with the buyers, and if it continues it could rally to 200p.
US
The Dow Jones and S&P 500 are fractionally lower today as the lacklustre move in US equities continues. The American indices registered a string of fresh record-highs recently, but we saw the bullish momentum fizzle out at the end of last week.
The ground that has been handed back is small when compared with how much they have risen since August.
Federal Reserve member, William Dudley, stated he expects a gradual increase in interest rates. Mr Dudley anticipates inflation to tick up in the medium term, as the soft US dollar and robust international growth will help the US economy. Last week, the US central made in clear they intend to hike rates in December. Central banks should be listened to, but they don’t always uphold their pledges.
The latest Chicago Fed national activity index came in at -0.31, and that compared with a reading of -0.1 in July.
FX
The EUR/USD is weaker today on account of Germany. The election has muddied the waters in terms of political outlook, and it is unlikely we will know what sort of coalition could be formed in the near term. A lack of strong political leadership at the biggest country in the eurozone is weighing on the single currency.
European Central Bank (ECB) President, Mario Draghi stated the eurozone still needs a large amount of stimulus, but he is confident the inflation rate will pick up
Also, the German IFO business climate slipped to 115.2 in September from 115.9 in December, and the consensus was for a reading of 116.
The GBP/USD may be off the lows from Friday night when Moody’s downgraded the UK credit rating to Aa2 from Aa1, but the pound has been drifting lower this afternoon as we are seeing a broad rally in the US dollar. The downgrade from Moody’s isn’t a major blow to the UK, but it does get traders thinking if other rating agencies will follow suit.
Commodities
Gold has been hit by the strength of the US dollar today and even though it hasn’t taken out the lows of last week, it hasn’t broken out of the downward trend it has been in for over two weeks. The metal has been hovering around the 50-day moving average at $1290 recently, and if it can hold above that metric, we might see a continuation of wider upward trend that it has been in since July
WTI and Brent Crude are higher today as the Kurdish region of Iraq holds an independence referendum. Traders are concerned the referendum could destabilise the oil producing region.
There is talk of OPEC and non-OPEC members extending their coordinated production cut. The production cap will be in place until the end of March 2018, but some countries like Saudi Arabia are talking about extending it until the end of June 2018.
WTI and Brent Crude oil have both hit multi-month highs today, the momentum is with the bulls.
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