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Dollar reversal boosts stock markets across Europe

Article By: ,  Senior Market Analyst
January 29, 2018 4:50 AM

European bourses have kicked off trading in the front foot, supported in part by a weaker euro and pound against the dollar. 

After dropping over 1.5% in the previous week, the slide in the value of the dollar has paused, at least for the time being. The dollar managed to bounce in Asia overnight and is seen extending those gains as the European session begins. Whilst there has been no fundamental change to instigate a reversal in the dollar, higher US Treasury yields have gone some way to supporting the bounce. 

US PCE data under the spotlight 

There is a quiet European economic calendar, so investors will be looking ahead to the Personal Consumption Expenditure (PCE) figures in the US session this afternoon. Concerns over stagnant inflation in the US have been steadily growing at the Fed, so any signs that this trend is changing could help underpin the dollars reversal. This will be the start of a busy week for the dollar which will also get input from the FOMC on Wednesday and the US jobs report on Friday.  

The stronger dollar is weighing on precious metals, with gold trading over $8 lower, pulling back from its 17-week high struck last week. Silver is also off by $17 in early trading.

Miners lead the FTSE higher 

Within the first hour of trading the FTSE managed to eke out an 8-point rise, taking its lead from a strong close on Wall Street. Despite the pullback in precious metal prices, the miners were in pole position boosted by a 1% gain in the price of copper. However, trading volumes are noticeably low. 

US Earning Season Shifts Up a Gear 

Looking out to the US open, US equity indices are pointing to a marginally lower start, pausing for breath after the phenomenal start to the year, which has seen the S&P 500 jump 7.5%. This week is a big week for earnings, with 120 S&P firms reporting, 10 of which are Dow components. Earnings from the likes of Facebook, Microsoft, Amazon and Alphabet will ensure that a volatile end to the week is on the cards.  

Bitcoin lower following Japanese Hack 

Spot Bitcoin was under pressure in early trading on Monday as investors respond to fears of a fresh crack down by authorities, this time in Japan, following the hack of Coincheck. The Tokyo based exchange confirmed bitcoins to the value of $530 million had been stolen, in what is the biggest crypto hack since Mt Geox, where $430 million were stolen, in 2014. 

This incident highlights one of the biggest concerns towards crypto currencies, namely security. The Japanese government have ordered Coincheck to beef up its security to prevent a repeat incident, as more authorities are clamping down on the virtual currency. Given the headline grabbing numbers, this hack is unlikely to disappear into headline history fast. Japan is one of the largest markets for cryptocurrency trading, accounting for around 305 -40% of global traded volume last month. Should this hack seriously dent confidence in virtual currencies, Bitcoin could see the selloff extended.

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