Midday wrap: Europe higher as risk appetite returns, DAX near ATHs
European markets enjoyed solid gains Thursday as risk
appetite returned. But the rally hardly betrays a wanton desire for equities
because a) we’re already at or near record highs and b) the selloff had not
been especially deep despite US-Iran conflict fears seeing havens enjoy firm
bid. Even a shaky ceasefire is enough right now to support the bulls. Stronger-than-expected German industrial production figures (+1.1% vs
-1.7% prev and 0.8% est) are helping sentiment, particularly in Frankfurt.
The DAX has led the charge with a 1.25% push higher
to 13,485, having earlier touched a high of 13,522. With investors
apparently keen to load up on risk with US-Iran tensions easing and a US-China
trade deal baked in, we may well see the drive to January 2018’s all-time high
just shy of 13,600. Geopolitical risks remain of course with the situation in
the Middle East still fluid, but you get the sense the bulls are keen to push
this over the line.
The FTSE 100 added 0.5% to break 7600 with resistance seen
at 7675, the high posted Dec 27th. A
softer pound is compensating for the weaker oil price.
Elsewhere US markets are firmer again with the Dow shaping
up for a triple-digit gain on the open.
Oil has held just short of $60 with no further
losses while gold is also holding the line around $1545.
In FX, the pound took a drubbing as the market decided Bank
of England governor Mark Carney’s comments were more dovish than before. GBPUSD
slipped the 1.31 handle to test support on the 50-day moving average around
1.3010. I don’t see much in what he said as particularly more dovish than in
the past. Commentary around the likelihood of the UK agreeing a trade deal with
the EU before the end of 2020 is also weighing on the pound today.
Meanwhile, as flagged in the morning note, the bullish
engulfing daily candle for USDJPY is resulting in further gains today
with the pair moving to 109.50 and momentum in favour of USD across the board.
Having cleared the 200-day and other MAs bulls are looking to break the trend
line drawn from the falling highs since the swing high of Oct 2018. Big 61% Fib
level to cross at 109.60 where we have seen rallies hit a wall several times
lately. This level will offer a decent amount of resistance as a
Cowen has come out with a
bunch of price target upgrades
Facebook raised PT
to $245 from $240
Alphabet raised PT
to $1575 from $1525
Twitter raised PT
to $34 from $32
Elsewhere AMD shares are up c2.5% pre-market after
Mizuho raised the stock to buy.
Benchmark has initiated Lyft
with a sell rating , price target of $35, which is $10 below yesterday’s
Boeing shares are
up a touch pre-mkt despite Berenberg cutting to hold. After enjoying a thumping
5% jump yesterday, Tesla shares are a touch softer pre-market after
being cut to neutral at Baird, a long-time bull which seems to think the recent
rally has run its course. They said: “we would not short the stock and remain
positively biased over the long run.” See
yesterday’s Equity Strategy: US earnings Q4
preview: Two major stocks to watchfor
more on Tesla.