Spreadex Market Update
Equities go for fifth day's gain out of the last six
European equities are once again supporting policy makers’ actions to broker a deal this week by adding a fifth day of gains out of the last six.
The FTSE 100 is outperforming respective European benchmark indices mid-session, reflecting the potential volatility against which UK listed stocks hope to be insulated in the event fat-tail risk scenarios are realised – European stocks can be expected to trade more cautiously the closer a significant announcement becomes.
Consequently, underperforming benchmarks subject to high volatility as a result of the debt crisis-induced selling can be expected to outperform short-term if news flows remain positive in respect of any deal looked upon as favourable.
Reassuring, at least, is the extent to which Bunds have been abandoned recently. Yields for German ten-year paper – inversely representative of demand – have risen 20 basis points in just 10 days. Such a restructuring of capital from a period of record demand indicates the bond market, a market much bigger than that for equities, is compounding the support for risk assets already seen.
The outlook, therefore, remains a positive one. And while bears will happily seek higher prices into which to sell, bulls have the market’s support.
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