2012 has got off to a flyer with the FTSE recouping almost half of its annual losses on the first day of trading!
Yesterday a few European indices such as the Dax and Cac were open and they started the New Year with aplomb, being boosted by stronger than expected manufacturing data across the continent and overnight indices have been boosted further by a good Chinese PMI number to kick things off. Buyers have piled into mining stocks this morning as a bout of increased risk appetite sweeps through the markets as the FTSE plays catch up.
Those who have read many of the headlines in the papers this morning will be forgiven for thinking that the year would start on a down note as report after report says that people in the UK are expecting more than before for the economy to dip back into recession. Confidence remains beaten up and the high street has suffered further blows with retailers under pressure.
Even though the PMI data released across Europe yesterday was on the whole better than expected, it still remains well below the 50 level suggesting contraction and a recession across the continent is possibly even underway as I write.
The New Year also kicks of with quite a bit of economic data to follow with UK’s own manufacturing PMI data which is expected to fall further below the 50 level, but don’t be surprised if this comes in slightly better than expected following on from yesterday’s good numbers in Europe and overnight in China. Then we get the same data from the US including construction spending numbers, which unlike in Europe, are expected to show the US economy continues to ride the storm.
The risk appetite is feeding across into all markets with the dollar coming under pressure which is allowing the euro to test the 1.3000 level again. We have been above here briefly already this morning but at the time of writing EUR/USD sits at 1.2985. The 1.3000 level can be expected to offer up some resistance as it replaces its precious role of support so for now the euro bears are just keeping it in check. Near term support and resistance is seen at 1.2915, 1.2885 and 1.3025, 1.3050 respectively.
Cable is also enjoying the risk on scenario as it makes gains against the dollar, but is flat against the euro. GBP/USD is at 1.5570 at the time of writing with GBP/EUR at 1.1995 as the latter pair continues to find the 1.2000 level a bit too much of a hurdle. For cable near term support and resistance is seen at 1.5400, 1.5350 and 1.5610/45 respectively.
Gold suffered some selling in between Christmas and New Year but has recovered well in the past few sessions dragging itself back towards the 1600 level. At the time of writing the yellow brick is trading at 1586 and has been benefiting from the rise in geopolitical tensions in Iran as the safe haven status comes back into play somewhat. Support and resistance is seen at 1560/42 and 1600/13 respectively.
Brent has seen a spike as Iran carries out its nuclear missile tests, but also the Chinese data and general risk on start to the year has helped lift the black stuff. At the time of writing Brent is trading at 109 on the figure and despite spending the latter part of 2011 trending a little lower the average price for crude was a record and many expect the same again in 2012. Support and resistance is seen at 108.20 and 109.45 respectively.