Stock markets in Europe and the US are showing gains as bullish sentiment is in circulation. The FTSE 100 hit a one month high and Germany’s DAX 30 is making a good effort to re-test its record high. In London, the mining sector has been given a boost thanks to the rebound in copper. The red metal incurred losses recently as the Beijing government talked about trying to curb metal prices but an inventory report from Shanghai showed that stockpiles are down 10%, hence the pop in copper.
Last night, the S&P 500 registered a new record close and the mood on Wall Street continues to be positive today. The NASDAQ 100 has also enjoyed a positive run lately and it is not too far from the 14,000 mark. Out of the major indices, the Dow Jones is the underperformer as it hasn’t rallied as much as the other benchmarks this week.
Inflation is still on dealers’ minds, although you would not think it to look at stock markets. Yesterday we saw US CPI hit 5%, its highest level since 2008, which should make for an interesting Fed meeting next week. US central bankers have called the rise in inflation “transitory” and traders will be wondering if they will stick with that view in light of the latest data.
The US dollar index hit a one-week high today, after what was largely a rangebound week. US government bond yields remain under pressure as it seems there are no major concerns the Fed will deploy hawkish language next week. The firmer US dollar is weighing on EUR/USD and GBP/USD. Even though the pound is offside against the greenback, it is higher versus the euro, the Swiss franc and the Australian dollar as the UK economy grew by 2.3% in April, an increase on the 2.1% growth achieved in March. Britain’s impressive vaccination rollout has helped greatly with the unwinding of restrictions and in turn, the country’s economic rebound.
Gold has been pushed into the red by the firmer US dollar. The strong inverse relationship between the two assets is playing out today. At the start of June, the commodity registered a six-month high, largely due to the weakness in the dollar but today it has moved back below the $1,900 mark. Oil’s uptrend continues today as the recovery story is assisting the energy. Goldman Sachs lifted its Brent crude price forecast to $80 as they are banking on higher demand.