Blue skies and sunshine in London this morning reflected the mood in global markets which saw overnight gains for all Asian indices: the Nikkei, Australia, Hang Seng & Shanghai as well as India’s Sensex which jumped 1.1% as it reacted to the 30% rise in Tata Consultancy Services on Monday. Such a positive mood has, of course, spilled over into both the commodity and forex markets with the euro taking centre stage once again as it pushed up back towards the 1.34 level at the beginning of the London session. The euro was joined later by the British Pound which took out the 1.60 level on the back of the CPI figures which came in at 3.7% suggesting that the BOE may have to raise interest rates sooner rather than later.
The weaker dollar was reflected in the usd index which has dropped back to the 78 support zone on the daily chart and has also helped to firm up gold and silver prices. Gold and silver have also benefited from renewed inflation fears with gold moving back over $1370 per ounce and silver now regaining the $29 per ounce price zone.
Factors for the remainder of today’s session will be the Ecofin (eurozone finance ministers) meeting in Brussels, the New York Empire State survey followed by the NAHB housing data. In addition Wall Street will also be looking to see whether the markets can post an eighth week of consecutive gains but traders and investors may be wary given the fall in the VIX (as outlined in my post last week) and the sharp rise in the S&P’s RSI which currently stands at 76.7 – any reading over 75 is usually taken as a sign of an overextended market and the last time the RSI was at this level in November 2010 the S&P fell 3.5% within the next 8 trading days. Moreover the announcement yesterday from Apple concerning the health of Steve Jobs may be the perfect opportunity for the market makers to shake out some stops when the Dow opens. Indeed Apple shares fell over 8% in Europe yesterday as soon as this news was released.
We have been warned!