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European equities are set to surge tracking bullish sessions overnight in the US and Asia. The divergent interpretation of yesterday’s FOMC continues to spread apart with equities guys taking it as dovish whilst FX and bonds guys took it as hawkish.
Even though the oil price continues to plunge and Russia’s about to enter the economic winter of recession, there are rumblings in the Chinese credit markets and Greece could be about to kick of the Eurozone crisis again, risk on sentiment is set to pervade in Europe today solely because of US bullish hysteria.
We saw a rally of more than 400 points in the Dow Jones yesterday to 17,792 with the US index posting the strongest 2 days gain since 2011. It seems that a dovish Fed managed to overshadow the concerns regarding growth in the rest of the world. It was the final piece of an optimistic jigsaw where encouraging US economic data and corporates earnings have already being confirmed.
In a sign of renewed confidence in the US economy, investors have returned to the greenback pushing it 55 pips higher against the euro to 1.2286. However, while it appears it’s just a matter of time until ECB comes up with the stimulus, an ongoing rising dollar might start to put pressure on American exporters. How much can they take it without seriously hurting those hefty earnings coming from abroad?
Just when the stocks recovered most of their recent big losses on fresh investors’ optimism, oil complex returned to an earlier stance – worries about supply glut. In addition, Saudi Arabia Oil Minister Ali Al-Naimi reiterated his country’s policy to maintain output. Consequently, the WTI crude resumed its slump, losing $1.03 yesterday to $55.13 a barrel.
In the face of a higher US dollar, gold prices rebounded $9.2 to $1198.00 on reports of increased physical demand from Asia. There were also reports that refineries in Switzerland are overwhelmed by demand from Asia.
Marius is a Dealer at Capital Spreads. His involvement with CFDs and spread betting started in 2008 after graduating from London Metropolitan University with a MSc in Finance. He contributes to the Daily Comment by providing a snapshot of the FX, indices and commodity markets (oil and gold).
Jonathan is a dealer at Capital Spreads. Having started his career in the city trading interest rate and bond derivatives in 2005, he then entered the spread betting and CFD industry in 2007 by joining the dealing desk at City Credit Capital. After successfully managing multiple asset risk books across the European, US and Asian time zones throughout the height of the financial crisis, he then took that experience to Capital Spreads in 2010.
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