Positive Week Start for Equities

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Monday, 22nd of February 2016, was a good start for stocks considering the continuous commodity prices’ volatility, the mounting fears about ‘Brexit’ and the sluggish growth of emerging economies. While there is still uncertainty across international capital markets and gaps in the demand-supply balance of core resources, such as oil, equities seem to reflect investors’ optimism for the week.

To put everything into perspective: the GBP fell 1.5% to USD 1.4179, its biggest downfall in 52 weeks, UK government bond prices are lower, boosting the 10 year yields up to 1.44% and the LSE jumped 0.8%. At the same time, Stoxx 600 opened 1% higher than Friday with the mining sector pushing the index up and the S&P 500 saw an additional 19 points to its value. On the Asian side of things, the Shanghai Composite rose 2.4% and the Japan’s Nikkei 225 jumped 0.9%. The data is in line with Financial Times’ reports.

The optimism expressed by global equity valuations is underlined by investors’ changing attitude towards a number of issues. For starters, the story with the slowdown of China’s economy is getting old. At the same time, investors seem to come to an agreement with the policies of most central banks to boost their economies, with some of them moving into negative interest rates territory. Turning to oil, Iran is now looking to go into production and compete internationally with Saudi Arabia, Russia and the US. However, various agreements between OPEC and Russia and between Iran and Iraq to limit production show a collective effort to boost the oil prices. Macquarie Group expects oil to trade between USD 25 – USD 45 during March.

However, not all assets were winners as a result of the above sentiment: gold is down USD 21 to USD 1207 per ounce.

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