European stock markets are strong as the political and economic landscape is improving.
Europe
There is talk US lawmakers will pass the pro-business tax cuts that President Trump proposed this week, and that has been fuelling global investor sentiment. The prospect of tax cuts being approved ahead of Christmas is propping up global stock markets.
The DAX is being driven higher by the hopes for the talks between the Social Democrats and the Christian Democratic Union that are due to take place this week. Germany hasn’t had a functioning government in over two months, but the economy is still going from strength to strength.
Hunting issued an upbeat trading statement, and the company stated its full-year revenue will be approximately $700 million – at the top end of their previous guidance. The energy services company is continuing to ‘exceed management expectations’. The share price is up 6.4% today, and has been in a solid upward trend since August, and if the trend continues it could hit 619p.
Ferrexposhares are up 4.7% after the upgraded they received from JP Morgan on Friday is still boosting the stock. Last week the US investment bank upped their target price to 240p, from 175p. In early December the company announced a special dividend of 3.3 cents per share and the company trimmed its net debt position. The share price has been in an upward trend since 2015 and it might target 300p.
US
The bullish run on Wall Street continues as the Dow Jones, S&P 500 and NASDAQ 100 have all hit record-highs again. The potential for tax reform is the talk of the town and the prospect of US companies cutting their tax rates from 35% to 21% is fuelling the positive move. President Trump is very pro-business and it would be a major boost to his premiership if it were to get approved. The market chatter is the vote will take place this week, and it is looking likely that it will be approved.
The US National Association of Home Builders (NAHB) housing market index jumped to 74 in December, and that was a sizeable increase on the November report of 69. The latest NAHB housing market index rose to a level not seen since 1999, which sums up how bullish homebuilders are.
FX
The US dollar is under pressure as traders are questioning how much growth it will actually bring to the US economy. US spending by consumers hasn’t been that impressive lately and traders are using this opportunity to trim their long positions in the US dollar ahead of the potential vote on US tax reform this week.
EUR/USD is being assisted by the decline in the greenback. The latest eurozone inflation report showed the cost of living held steady at 1.5%, meeting expectations. The lagging CPI rate is something that has bothered Mario Datghi, the European Central Bank President, Last week the ECB kept their policy unchanged ,but yet again they stressed the possibility of additional monetary easing, if they feel it is required.
GBP/USD has been boosted by the slide in the US dollar. The UK Confederation of British Industry (CBI) industrial orders expectations report remained at 17 in December, but easily exceed the reading of 14 that traders expected. The fact the report didn’t slip on the month is positive, but today’s move is more to do with a drop in the US dollar.
Commodities
Goldhas hit a level not seen since early December as the drop in the US dollar has made the metal more attractive. Gold come under severe pressure last week in advance of the Federal Reserve’s decision to hike interest rates by 0.25%. The US central bank is unlikely to hike interest rates again until the spring of 2018, and that is why we are seeing funds flow back into gold.
WTI and Brent Crude oilare still in positive territory but have been lacking direction lately. The energy market appears to be range bound and even though it has held onto the majority of the gains it made on the run up to the OPEC meeting last month, it hasn’t pushed beyond that. The sideways trading of the oil market suggests traders don’t know which way to turn in 2018.
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