The dealer played the risk-on card in the past 24 hours but the bullish bounce in Asia passed Europe by even thoughoil, the US dollar, gold and the Australian dollar reacted strongly to the improved sentiment.
The rally started in Asia after the Presidential debate yesterday and some analysis was that with Romney winning the debate the chances of a Republican victory were increased. Seemed a little bit of a stretch to me but the sectors Romney mentioned in the debate rallied so who knows? Also, comments by ECB President Draghi overnight reiterating his commitment to rescue the euro and to buy bonds if required.
In truth the recent market moves are just noise but the key is that the positive trends in the euro, S&P 500, gold and our own SPI200 (my futures based proxy for Australian equities) have persisted for some time. So perhaps this consolidation was the pause that refreshes. By that I mean that there are two types of consolidations in markets in my experience: price, where the market goes in the opposite direction for a time but does not break the trend; and TIME, where markets go nowhere for a while washing off the overbought or oversold nature of their moves before then resuming their trend.
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Last night’s rally is just one night so it could equally be just noise but the trends persist. That’s the key.
Getting back to Draghi’s comments, has anyone noticed that the focus remains on the euro and not the economy? Of course the euro is the proxy for keeping the EU as it stands but I reckon that the ECB and the political class are still working at a different pace to the market timeframes we work with. Just something to remember as it almost guarantees disappointment and reversals every now and then.
Data in the US overnight showed factory orders ex-transportation (transport has been very volatile recently) rose 0.7% in August reinforcing the ISM Manufacturing move back above 50. Shipments dropped in August from July and inventories rose so this is something to keep an eye on. Fed minutes were out and showed the discussions and concerns about the unemployment situation is what drove the move to QE3.
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At the close of play the S&P 500 rose 0.72% to 1461, the Dow was up 0.60% and the NASDAQ climbed 0.45%. In Europe there seems to be enduring concerns about what Spain is doing, even though the Spanish bond auction went off extremely well. At the end of the day markets were less sanguine then their US counterparts with the FTSE closing up just 0.03%, the DAX fell 0.23% and the CAC down 0.19%. The escalating tensions between Turkey and Syria might be concerning Europe as well.