Anyone tiring of the sideways moves in equity indices should be thrilled. We have finally broken out of the range and despite some technical signals to the contrary, the move has been to the upside. Yesterdays’ surprisingly good new home sales data out of the US was something of a catalyst – but I would not rule out this being a temporary squeeze before the next leg down for US indices.
FOMC member Bullard has been back on the wires, throwing the odd spanner into the works, as he is wont to do. He has suggested that a rate hike is data dependent and that June is not set in stone but that July could be a candidate. These FOMC members really need to get their stories straight.
Greece Part VII – the 2016 version©, seems have instilled some confidence in the market too; apparently reaching some agreement in respect of potential debt relief – the key word here being ‘potential’. All to keep the IMF in the loop, and even this remains uncertain.
The beleaguered country has agreed on a deal to unlock a further 10.3bn euros ($11.5bn; £7.8bn) in loans from its international creditors, after talks in Brussels. Even the creditors are calling it a breakthrough – and I suppose it is given that Greece desperately needed this cash to meet debt repayments in July.
Given the regularity of Greece in the headlines over the years, it’s much too early and possibly delusional to believe that this debt crisis is behind us. But can kicking is a strategy of sorts.
The euro has remained unaffected by all these shenanigans – but the debt buying by the ECB may be running out of road and indeed options in terms of the eligible assets it can purchase. Nevertheless, the euro is lower and this has helped the Eurozone indices shake off the recent sideways bound moves. Support at 1.1125 then 1.1060 will be key to the recent uptrend in the pair.
The upside in USD/JPY matches that of the S&P 500, and the pair is now trading at 110, which has helped the Nikkei rise 1.57%.
Oil prices are also higher, with the $50/bbl level very much in view now. Any push through this level would likely engage risk sentiment even further and could easily put to bed any concerns over disinflation as base effects begin to encroach in the latter half of this year.
German IFO came in at 107.7 – better than expected. This was foretold to some extent by the latest PMI data for Germany, so this coupled with the weaker single currency could well see the Dax make a higher move. Now above the 200DMA, this may now act as support.