- Stocks closed higher once again
- Fears around trade war or geopolitical concerns have faded
- UK’s wage data posted its best level since 2015
There is one strong force driving the equity markets higher on Wall Street – the stellar earning season. Stocks closed higher once again last night over in the US and the spillover effects of higher equity markets can be seen over in Asia as well. Investors in Europe are also set to build on yesterday’s momentum, generally speaking, it is just one of those risk on days – at least for now.
Fears around trade war or geopolitical concerns have faded very much as the US and North Korea have started high-level talks to de-escalate tensions. Investors focus on the tech and banking sector for now. The earning results of Goldman Sachs confirmed yesterday that higher volatility is something they feed on. Under this environment, their trading revenue could only increase. Although, the confirmation of the same trend is yet to be seen- when other major investment banks will post their earnings.
On the central bank side, the new move by the People Bank Of China under which it has cut the bank reserve requirement by 100 basis points has also stimulated the risk on trade.
As for the forex market, evidence was clear in the U.K. wage data that things have started to move in the right direction. The wage data posted its best level since 2015. We had an evidence yesterday that higher inflation is outpaced by higher wages. The data confirmed that the wage growth was 2.8% while the inflation was 2.7% for the same period. With the further decline in the headline unemployment number, one would hope that the wage growth has only one way to go and that is to the upside.
Traders will be watching the upcoming U.K. CPI number very carefully today. The forecast is that the rising force of Sterling against the dollar would help the number to print a reading of 2.6% while the previous number was at 2.7%
