European markets have enjoyed good gains today, hitting their highest levels since early August last year, after yesterday’s surprise decision by the Fed to pre-commit to a lower rate policy until late 2014, well beyond market expectations.
Talk that Greece’s creditors were ready to accept a lower coupon rate of less than 4% also leant a more positive bias to equity values.
The biggest gainers have been mining and basic resource stocks with Kazakhmys leading the sector higher after reporting that it had met all its major copper production targets for 2011 and expects to do so in 2012.
Gold and silver miners Randgold Resources and Fresnillo have also kicked in as precious metals prices jumped sharply on expectations of further easing by the Federal Reserve later this year.
Financials are also higher with Lloyds, Royal Bank of Scotland and Barclays also higher on expectations that central banks will continue to ease monetary conditions in the coming year.
More defensive shares have lagged behind today’s gains with Vodafone and Imperial Tobacco slipping back.
US CFD trading markets opened higher after yesterday’s surprise decision by the Fed to pre-commit to an easy monetary policy out to the end of 2014.
This has seen the Dow push close to last year’s high at 12,875, a break of which would see it hit its highest levels since the index made twin highs at 13,130 in May 2008.
Some more positive earnings numbers have also helped buoy sentiment, with Caterpillar blowing away expectations for Q4, returning earnings of $2.32c a share well above the $1.73c forecast as demand for mining equipment rose. The company also raised its full year estimates for profits.
Telecoms company AT&T also announced Q4 numbers which saw revenues rise on the back of record sales of iPhone and Android phones, however EPS came in below expectations of $0.43c a share at $0.42c.
Economic data also came in better than expected with December durable goods showing some improvement, on the back of better than expected aircraft sales, up 3% in December, above expectations of a 2% rise.
Weekly jobless claims came in higher than expected at 377k, after last week’s surprise drop to 356k.
New home sales for December on the other hand disappointed sliding back sharply, dropping 2.2%, more or less reversing November’s 2.3% gain.
The US dollar has been hit across the board with the commodity currencies posting good gains led by the Australian and New Zealand dollar.
The single currency has continued its recent rebound making new highs for 2012 on talk of an improved private sector offer on the Greek PSI, while yield differentials between US and German 10 year bonds move back in Europe’s favour.
Italy also managed to get €4.5bn of 2014 bonds away at reduced yields, while Italian 10 year yields fell to their lowest levels since early December.
The Swiss franc is also higher as forex CFD trading markets look set to test the Swiss National Bank’s resolve on the 1.2000 peg.
The pound continues to lag behind, and though higher against the US dollar it is slipping back against the euro as UK economic data continues to disappoint.
CBI reported sales data for January showed a sharp fall to -22, after December’s positive 9 reading. This suggests that a lot of consumers brought forward their January spend to take advantage of some heavy pre-Christmas discounting.
Gold prices have surged in the past 24 hours after last nights Fed meeting raised the prospect of more stimulus in the next few months, sending precious metals sharply higher. Silver prices have also risen sharply, outperforming gold.
Crude oil CFD trading markets have also risen sharply on expectations that looser monetary policy will stimulate growth and thus boost demand.
News that the EU will address any oil shortfalls as a result of the Iran export ban, by tapping reserves has also helped underpin prices.
Copper has managed to get above its 200 day MA for the first time since August last year, heading towards resistance at $3.9325.
This is a 61.8% retracement of the down move from $4.5125/$2.9940, as the US dollar has slid back on optimism that an easier global monetary policy will help generate global growth.
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Market News from Michael Hewson, Analyst, CMC Markets.
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