Spreadex Market Analysis: Global Indices Trading Higher

AM Analysis – “Global indices are broadly trading higher” – Alex Conroy
Royal Mail started conditionally trading this morning and opened up 36% on the IPO. The hugely oversubscribed stock saw anyone who tendered for shares up to £10,000 received just shy of £750 worth of stock however those who tendered over £10,000 received nothing. Official trading begins on Tuesday with the conditional trading meaning should for some reason the privatisation not go through the shares can be recalled. With demand so high for this stock expect a volatile day.

It appears President Obama and the Republicans are nearing a deal to re-open the government and temporarily push back the debt ceiling to November 22nd. After a 90-minute meeting last night no formal deal was agreed however on-going discussions suggest that an agreement should come today. The idea being the temporary push-back will allow the sides to come to a more productive and long-term deal. This combined with the announcement of the next Fed chairman Janet Yellen has provided the US markets with a huge boost with global indices and futures up.

The implications for the next 6 weeks however are less positive. Simply delaying the issue could lead to further volatility in the markets with both sides seemingly unwilling to budge up until this point. Only the possibility of global economic Armageddon and the pressure of public opinion has forced the Republicans to temporarily yield. The egregious failure of bi-partisan politics throughout this ordeal suggests this decision and apparent willingness to deal by the Republicans should be taken with a grain of salt.

PM Analysis – “Financial markets close on a positive note” – David White
Financial markets have closed out the week on a positive note, having printed the strongest daily return for the DJIA this year. The suspicion many had been caught short and lacking risk proved persuasive on Thursday morning when buy orders came storming in. What resulted here in London was continued buying of risk until today’s close. Gold collapsed.

News that the political deadlock in Washington had eased sent prices soaring, allowing for a little bit of common sense to return. Traders are keenly watching gold as it plummets this afternoon, targeting the downside. Gold looks weak here and is moving in line with where institutional money expects flow.

The political crisis in Washington could well have been one of the last reasons to own gold for the near-term, helping to explain this week’s sell-off. It remains compelling that the broader economy is improving and that gold is mean reverting as investors anticipate drivers to weaken.

[The original articles by Spreadex can be found here.]

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