After Apple reported better than expected profits and the U.S. lawmakers are approaching an agreement regarding the country’s debt ceiling, confidence was boosted and risk appetite within the global financial markets increased demand for higher yielding assets, dragging the Asian and European stocks in green.
Since Apple’s quarterly profits more than doubled, the outlook for the U.S. economic performance could become more positive. Optimism however was also supported by news that the U.S. congress is close to reaching a deal to raise the debt ceiling before August 2, deadline, and reduce the deficit.
Yet the positive momentum financial markets enjoyed in the past couple of days may be short lived, since Europe’s credit woes remain a core issue. Investors will continue to be vigilant since EU leaders will start a summit tomorrow during which they will continue to negotiate over a resolution to EU’s debt crisis.
Yesterday’s better than expected housing data in addition to better than expected earnings from major U.S. companies extended the dollar’s drop, since rising risk appetite is weighing down on the safe heaven greenback against other majors. The dollar index is trading below the 75.00 level as of this writing.
The euro extended its gains ahead of tomorrow’s summit, since investors hope officials might find a solution to ease Greece’s debt problems. But since contagion risks still persist and Italy and Spain are still in danger, the euro is seeing limited gains. The single currency is hovering now around today’s highest at 1.4200.
The pound was weak this morning ahead of BoE’s meeting minutes, which showed a split among the MPC members. Yet the majority of the panel members remained dovish, and interest rates most probably will be kept low for an extended period of time although inflation is expected to rise further, above 5%.
This stance was widely expected by the markets, therefore, the GBP barely moved with the news, and as of this writing continues to move in a euro centric mode, with an upside momentum, around the 1.6130 level. The AUD was also able to gain today and is trading around the 1.0740 level as of this writing.
Gold retreated from yesterday’s record highs, trading around $1586.00 level, as demand for safe heaven softened; yet since the outlook for the U.S. economy improved, crude oil managed today to extend yesterday’s gains and as of this writing is trading at $98.80 per barrel level.
Europe was relatively quiet with data today, with only the German PPI on schedule, which slightly exceeded expectations. However the U.S. will release later the existing home sales numbers along with the crude oil inventories numbers, both expected to improve