Spreadex Market Update
Strong US data leads dollar higher but hampers Dow et al.
The dollar took a moment to decide what to do with this news, but the fact that core CPI (i.e. the figure not dragged down by oil’s price volatility) increased to 1.7% eventually gave the greenback the inspiration it needed to take back its losses against the euro and increase its gains against the pound. This is, of course, due to inflation’s importance to the rate-hike raise; this marginal growth points in the right direction, at least in the Fed’s eyes, and allowed the dollar to achieve its current gains.
Better than expected manufacturing figures and the best new homes sales data since April 2008 added to a rare day of uniform positivity for US economic news, but this could only cause marginal growth in the Dow. There was only one reason for this failure: the latest resurgence of the dollar, somewhat of a recurring villain for the Dow Jones, and the fear this causes in investors prevented the US markets from joining in with the growth seen elsewhere.
Eurozone ministers seem confident that those frosty German/Greek relations have begun to thaw, and the combination of this alongside some impressive region-wide manufacturing data this morning saw the DAX and the rest of the Eurozone indices post the kind of gains that abandoned the region for the majority of last week. These gains were helped by the mid-afternoon declines felt by the euro-dollar, after the currency had held out so valiantly against the greenback for much of the morning.
The FTSE, whilst less strong than its continental peers, was no slouch this Tuesday afternoon and is on track for another record close, showing the kind of form that the DAX did throughout February. The FTSE also managed to hold off a dire situation for its mining stocks, with Vedanta Resources, KAZ Minerals and Rio Tinto all suffering under copper’s sustained decline, a drop caused by China’s weak manufacturing data. In stark contrast to the FTSE, the pound became the main victim in the dollar’s latest rally, as election worries and inflation woes further destabilised sterling.
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