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European equities are set to open modestly higher following marginal overnight gains in the US and some interesting data from China. A determined effort from across the Atlantic saw US markets claw their way tooth and nail against some bearish news to finish modestly in the green yesterday and some of that resilience is filtering through to Europe this morning.
Also keeping the bulls head just above water this morning will be the ‘goldilocks’ China GDP data. Although it declined to a 5 year low, it wasn’t a seismic contraction but was just enough to perk up the bulls interest on hopes that Beijing will step in to stave off a deeper collapse.
Initially, the Dow Jones started the day on the back foot as investors were still weighing the risk of contagion from weakness in Europe. Nonetheless, by and large corporate earnings still look in good shape which drove a rebound during the afternoon. The slump in the International Business Machines might have stopped the Dow from going into positive territory as it ended rather unchanged at 16,440.
The Fed seems to be tempted to adopt more of a wait and see attitude with regards to raising interest rates now that oil prices are in freefall. They can definitely afford the move as economic data indicates the US is in better shape than Europe whose short term problems are probably going to escalate. As such the US dollar stopped appreciating (at least for now?) with the shared currency gaining back 45 pips to 1.2799 yesterday.
The WTI crude price resumed their slump, losing 55 cents to $81.85 a barrel as weak oil demand continues to take its toll. Crude prices tumbled more than 20% since June helped also by plentiful supplies with production increased in places like Libya, Iraq and the US. All the eyes are now on the $80.00 mark where a test is expected soon.
As a hike in rates might just be put on hold by the Fed on concerns about world economic growth, gold investors spotted the opportunity and jumped back in. They pushed the precious metal $7.9 higher to $1246.7 with its outlook changed for the better given the growing pressure on ECB to take more decisive action.
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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