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German grand coalition possibility props up stocks

Equity traders are cautiously optimistic in Europe as markets finished in the red in Asia overnight. 

Sentiment among China’s steel and sales managers cooled this month and that prompted a decline in stocks in the Far East. At the back end of the week China will release the manufacturing and non-manufacturing reports and dealers are lowering their expectations.

In London, mining companies like Glencore, Vedanta Resources and Antofagasta are lower on the day over concerns about China’s slowing economy.

Political optimism is picking up in Germany as the Social Democrats in Germany are to meet with Christian Democratic Union later this week, to discuss the possibility of entering into a ‘grand coalition’. The Germany economy has been managing just fine without a functioning government for the past two months, but investors would welcome some political stability.

Aviva shares are up 1.9% as the company is expected to announce a £1 billion share buyback scheme. The stock has been in an upward trend since June 2016, and if it can hold above its 200-week moving average at 492p, it could target 578p – the 2015 high.

EUR/USD is largely flat on the day and volatility could remain low since we are not expecting a major economic indicators from the eurozone today. The possibility of a positive political outcome in Germany and the soft greenback is assisting the single currency.

GBP/USD is creeping higher again and traders are looking forward to the speech from Andy Haldane at 2.30pm (UK time). The UK central banker is known for his hawkish views, and his announcement could keep the pound in its positive trend. 

At 3pm (UK time) the US will announce the new home sales figure for October, and traders are expecting a reading of 627,000, down from 667,000 in September.

We are expecting the Dow Jones to open up 3 points at 23,560, and we are calling the S&P 500 up 1 point at 2603.

Thor Industries will announce their first-quarter figures today.


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