Optimism Rising

Published by Filipe R. Costa on Thu, 18/10/2012 - 11:19
market optimism

Daily Market Commentary for October 18: The US economy continues to improve according to the latest economic reports. Housing starts and permits showed a significant improvement in September raising optimism across the pond that is quickly spreading around the world.

Improvements in the housing sector are always welcomed as this is one of the most important sectors of an economy because it can push all others. Buying a house means buying several other things and hiring services. During many years, the US economy couldn’t count with the help of the housing sector but the latest data points to significant improvements.

Optimism led the main equity indices higher not only in America but also here in Europe. The FTSE 100 was lifted up 0.69%. In Spain, optimism is also improving but much because it is believed Mariano Rajoy will very soon ask for a bailout. The Euro is rising on this belief, currently trading at 1.3107.

One of the biggest gainers with the risk rally is the Aussie. One month ago it traded around 1.0625 but quickly dropped to 1.0150 until the beginning of this month. With investors now more optimistic in general, the Aussie has now recovered again to 1.0400.

Gold has been under performing the broad market. Even with the rally experienced over the last few days, the precious metal has been losing steam. In my view this weakness is set to continue as the better than expected economic data in the US is killing all QE3-driven trade.

Today there is a little weakness during morning trade and the main equity indices are losing some points. Let’s see if initial jobless claims can contribute to the optimism again or if what we have seen last week was more a noisy reading than anything else.

Name Last price Close Price % 5-Day % YTD %
FTSE 100 17/10/2012 5910.91 0.69 2.32 6.08
IBEX 35 17/10/2012 8128.2 2.37 6 -5.11
S&P 500 17/10/2012 1460.91 0.41 1.98 16.17
Dow Jones Industrial Average 17/10/2012 13557 0.04 1.59 10.96
EUR/USD - US$ per Euro 17/10/2012 1.3112 0.05 1.97 1.22
EUR/GBP - £ per Euro 17/10/2012 0.8127   1.16 -2.46
Gold (LBM) $ 17/10/2012 1749.9 0.37 -0.68 11.68
DAX (Xetra) 17/10/2012 7394.55 0.25 2.63 25.37
GBP/USD - US $ per £ 17/10/2012 1.6135 0.05 0.81 3.9
CAC 40 17/10/2012 3527.5 0.76 4.8 11.64
Nasdaq 100 Index 17/10/2012 2775.62 -0.1 1.73 21.85
FTSE MIB 17/10/2012 16233.75 1.55 5.14 7.58
Nikkei 225 17/10/2012 8806.5 1.21 2.45 4.15
Crude oil (Brent) Composite 17/10/2012 112.58 -0.6 -0.77 4.81
Crude oil (Light Sweet) Composite 17/10/2012 91.99 -0.53 0.8 -7.08