Risk-on pushes global stocks higher...
The FTSE continued to charge higher on Monday, building on last week’s gain of 0.4% as optimism that the US tax reform will get pushed through this week has buoyed the mood for equities across the globe. The FTSE charged meaningfully through 7500 as it continues to climb towards its record high. At 7528, it is just 40 points off its record closing high and 70 points off its record intra-day price. These are achievable gains before the close for Christmas on Friday.
Risk on sentiment is driving trading, as investor optimism over the US tax bill being passed sooner rather than later is lifting stocks. The 2 wavering Senators, which could have thrown the vote in the Senate slim majority are now back on side and the markets are cheering.
Dax Breaks out
Over in mainland Europe, the Dax was also putting in a notable performance, up over 1.5% on the day hitting a 10-week high in the process. Not only was the German index cheering tax reform progress along with other global indices, but this timed nicely with progress in coalition talks giving the Dax a double boost. Angela Merkel has expressed her desire to push the exploratory talks forward between her party, the CPD, and the opposition and potential coalition partner, the SPU, by mid-January in order to end the political deadlock in Germany. The Dax has rallied over 200 points, breaking out above 13,300.
The euro was also trading higher, up 0.6% versus the dollar and comfortably above $1.18. Data from the eurozone showed that inflation, as measured by the consumer price index ticked higher to 1.5% in November, as expected. Still a welcome relief after the disappointing inflation forecasts from the European Central Bank at the end of last week.
Dow to 25,000?
The US markets continue to push northwards, with the Dow eyeing 25,000, a milestone that it could reach should Congress pass the US tax cuts bill. These are some astonishing moves that we have seen recently, given that the Dow only passed through 24,000 three weeks ago and now 25,000 could be on the table.
Dollar declines in wait and see mood
The dollar has proved itself to be more reserved today, wanting to wait for more details before being caught up in tax reform euphoria. The dollar is actually trading lower versus most of its peers. Sterling is one of the biggest gainers versus the buck, up 0.9% after falling hard on Friday on Brexit trade deal concerns.
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