US Stock markets jumped the most in nearly six months during yesterday’s trading as strong results at start of the reporting season helped boost investor confidence. The Dow, S&P and Nasdaq all finished the day with gains north of 2% with the Nasdaq nearly hitting 3%, futures are pricing in even further topside as Netflix reported a surge in net subscribers after the market close. Currencies reacted as expected with a leaning towards a ‘risk on’ bias which kept the greenback at recent lows and saw commodity currencies turn bid. However, in a similar fashion to last weeks price action the FX market hasn’t seen any excessive moves as it reacts to the volatility in the equities markets and it seems to be waiting greater certainty from bigger macros themes before resuming trend patterns.
It’s been an interesting last couple of weeks in financial markets and even though the longer horizon looks a lot more uncertain, the current data coming through to the market is still relatively positive. It does seem that we are set to be trading in whippy conditions for the medium term as current global growth and strong or at least encouraging data, competes with future expectations of a possible sharp downturn brought about by sanctions and trade tariffs across the board. Many analysts are looking at this reporting season in particular and the general data over the next couple of months for signs that the receding tailwinds of fiscal stimulus and the headwinds of tariffs are going to hit the US market simultaneously but on first viewing this doesn’t appear to be happening.
Looking ahead to today’s trading sessions and investors will be looking for a continuation of the positive sentiment that has come through the market overnight. It’s relatively quiet again in terms of fundamental economic data releases for the Asian session, but things start to get a bit more interesting in the London session with the release of the UK’s latest CPI number as well as the start of the EU’s Economic Summit. The focus in the US will come towards the end of the day as the FOMC releases the minutes from their last meeting.