Everyone who had doubts, whether investors would finally start buying undervalued stocks after two weeks of sell-off on global markets (leading to a rare 7-session losing streak of DJIA), shouldn’t have them after yesterday’s closing on Wall Street. The bullish session (DJIA +2.82%, S&P 500 +3.13%, Nasdaq Composite +3.13%) shows that the demand side is not giving up.

Wall Street awaiting company results

A strong rebound, which didn’t materialize on Tuesday, partly due to the weak ISM, took place yesterday. The State Street results’ forecast, better than the estimates ($0,93 EPS against $0.72 consensus, $2.2 bln revenues compared to $2.16 bln estimated) pushed the financial stocks up and increased the appetite ahead of the quarterly-results season starting next week on Wall Street. The stocks of the retailers went up awaiting today’s release of the International Council of Shopping Centers report on the retail sale in the US chain stores in June. The mood on the markets is clearly better after yesterday’s session for at least two reasons. First of all, the focus of the investors has moved from macroeconomic data reports towards quarterly results of the companies. Secondly, the supply side dominance on charts has weakened. Long white candles on daily DJIA and S&P 500 charts as well as the return of the indices above the May and June lows raise questions about the near-term bearish scenario drawn 24 hours ago.

Optimistic news from Australia 

The rally on Wall Street was an impulse for the Asian markets. The Australian Labor Market data published tonight was a strong support as well. The unemployment rate remained on the same level in June (5.1% compared to 5.2% forecast). It is at the lowest level since January 2009 and for the first time in history lower than the unemployment rate in Japan. June was another month of employment growth this year (45.9 thousand new jobs so far this year compared to 15.8 thousand expected). This data supports the optimism raised after yesterday’s Reserve Bank of Australia meeting. Consequently, the AUDUSD can retest the June’s highs in the near term.

Better data from Germany support the European emerging currencies

Better mood on financial markets and higher risk appetite supported  not only the Australian dollar but also other high yielding emerging market currencies. The opportunity for the zloty, the forint and the Czech koruna arises with the support of encouraging macroeconomic data (i.e. industrial production in Hungary and Polish PMI). Another factor supporting the currencies is the Germany’s balance of trade data for May published this morning. The German imports increased by 14,8% m/m.

Jacek Mielcarek

Disclaimer, investment risk warning
X-Trade Brokers Dom Maklerski S.A. does not take responsibility for investment decisions made under the influence of the information published on this website. more