A strong rebound in European equities and metal prices

Tuesday, July 22, 2014

European equity markets rebounded strongly in today’s trading session as investors saw the recent low levels as a buying opportunity. The CAC, DAX, IBEX and the London equity market surged between 1.0% and 1.6%, while the USD index climbed higher towards 80.8 as the US dollar rallied strongly against the euro and sterling following robust US economic indicators.

USD Index

DXY Curncy (DOLLAR INDEX SPOT)   2014-07-22 16-55-38

On the macroeconomic front, US inflation was fairly unchanged at 0.3% in June, in-line with expectations, while y/y the number remained unchanged at 2.1%. We received fairly robust US housing data, which increased hopes regarding a strong recovery of the housing market. Monthly home price rose by 0.4% in May, while existing home sales increased to 5.04 million in June beating expectations of 4.97 mln. The US Richmond Fed composite index rose to 7 in July compared to 3 in June, showing improving market conditions across the manufacturing and services sectors.  

US Existing home sales

ETSLTOTL Index (US Existing Home 2014-07-22 16-57-40

In London, banks and mining stocks were the main support of today’s strong rally. Real estate stocks posted solid gains following increasing optimism about both the US and UK housing markets. HM Revenue and Customs' housing data showed UK property sales hit their joint highest monthly total in June since the financial crisis began. British Land, Intu Properties, Land Securities and Hammerson surged between 2.08% and 3.16%. HSBC and Standard Chartered also climbed higher 1.5% and 1.33%, respectively as risk appetite increased.

Base metals prices rebounded strongly today with the exception of Tin. Aluminium extended gains in LME trading today, reaching its highest level since February 2013, following a strong rebound in the metal’s demand while aluminium’s stockpiles continue to decline to their lowest level in 22 months.

LME Aluminium 3M

LMAHDS03 Comdty (LME ALUMINUM  3 2014-07-22 16-56-19

Copper also recovered to test the $7,050 level, while nickel outperformed by adding more than 1.3% above 22,130. Anglo American, Glencore and Fresnillo gained between 2.35% and 3.5%, while BHP Billiton, Rio Tinto, Antofagasta and Mondi also followed the uptrend.

LME Nickel 3M

LMNIDS03 Comdty (LME NICKEL    3 2014-07-22 16-56-43

Tomorrow, investors will be keeping an eye on Eurozone’s consumer confidence flash data for July as well as Bank of England’s minutes from June’s meeting.  

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