pricemarkets morning brief – 28 october 2013
Yet more gains in the US on Friday and a positive handover from Asia are set to fuel the bulls on the European open. Although European markets finished little changed on Friday, gains in the rest of the world will inevitably drag European risky assets higher. It’s psychologically hard to buy at multi year highs when the underlying fundamentals don’t really warrant such levels, but in such a low yield environment many traders are becoming reluctant buyers for fear of missing out. The economic data hasn’t really kept pace but with the central banks having the bulls backs, traders can keep their fingers crossed that the fundamentals will eventually catch up.
On one hand weak economic data in the US fuelled growing speculation the Federal Reserve has no choice but delay tapering at least for the rest of 2013. On the other hand corporate earnings surpassed the forecast. Both were good enough reasons for investors to push equities higher towards the mid September record. As such the Dow Jones rose 36 points to 15,559.
A drop in consumer confidence in the US sent the greenback down versus the euro with the EUR/USD pair gaining 10 pips to1.3807. In the run-up to the FOMC meeting due on Wednesday the euro could have the upper hand especially if the economic figures will continue to post disappointing results.
Some last minute bargain hunting in the energy sector allowed the WTI crude oil prices to rebound 86 cents to $98.01 a barrel after a sharp decline throughout the whole week. Near record crude oil production in the US is keeping investors nervous that inventories are about to go up even more. There is already speculation that processing needs to reach summer time highs to lower the existing stockpiles.
Once it became obvious the odds for reducing stimulus in the near future are slimming (for whatever reasons) gold prices made a move to the upside. The yellow metal gained another $4.9 on Friday to reach $1352.1 and looks set to enjoy a mini recovery on the short term. However, gold prices remain down just under 20% for the year so to get back in fashion will probably require more than the current events.