Well we’re clinging onto gains! At this stage it’s purely a continuation of last week’s bullishness as investors look ahead to this week’s crunch EU summit believing that politicians won’t fall short this time because the ramifications of inaction are far too great.
December is also historically the most bullish month of the year and so those fund managers who’ve struggled to perform will not want to miss out on any potential rally into the year end.
The FTSE has commenced the week in a relatively bullish mood just putting itself in the black although it’s hardly a convincing rise. We’re only just clinging onto gains but it’s better than where we thought we’d start back on Friday night when US markets ended the week on a small downer. You won’t be surprised to hear that the main highlight of this week is an EU summit to be held on Thursday and Friday where greater fiscal integration is expected to be proposed. Not another EU summit I hear you cry. What can they possibly do to provide a definitive answer to the whole eurozone crisis that they couldn’t already have proposed at the previous ones? Well this one is largely seen as being the be all and end all summit with the market hoping for the big bazooka, namely the ECB, having a greater role in ending the crisis once and for all.
The coordinated action from central banks last week has been complimented by lots of announcements of austerity measures over the week end. Italy and Ireland are the latest to announce their measures to reign in their debt which in Ireland’s case is yet another round. They are the only country to prove that austerity can work but unfortunately for them their deficit was so large that another dose was always going to be needed and this can’t be ruled out for other EU members too.
In the run up to the summit at the end of this week it’s hard to see markets doing much unless there’s a similar surprise to catch us off guard such as the central bank move last week. This was the main contributor to the rally we’ve seen thus far this month and with the FTSE trading at around 5560 at the time of writing there’s lots of near term resistance levels seen at 6515/50/85 and to the downside support is seen at 5490/5500 and 5340.
Today sees lots of PMI service numbers released with the UK’s expected to just about cling onto the 50.0 level. A dip below will mean that the service sector’s run of expansion will have come to an end after 10 months on the trot and with the headwinds faced by business out there it’ll be a close call come 9.30 London time this morning. Let’s put it this way, if we had the snow like we did this time last year then we would probably see this number come in well below 50.0.
The euro is showing a degree of life this morning as EUR/USD bounces off the 1.3400 level. At 1.3440 at the time of writing near term support and resistance is seen at 1.3340/05, 1.3255 and 1.3545/70.
With a strong resistance around the 1750.0 level, gold found it hard to sustain the gains seen on Friday. So after investors saw it reach a high of 1763.0, they decided to start banking their profits when good non-farm data was released showing the unemployment rate had dropped to 8.6%, the lowest level since March 2009. All in all, the precious metal rallied 4 dollars to close at 1748.95, which at time of writing hasn’t seen much action and is trading at 1745.3.
With an as expected rise of 120,000 jobs last month and a lowered unemployment rate, energy investors were optimistic that demand for black gold will be boosted in the near future considering the continued recovery in the global economy and this bumped up prices of crude.
There was a slight limitation to the advance however, with the greenback rallying, but nevertheless Brent crude still closed up at 110.11. This morning Brent is a little firmer at 110.90.
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