Risk appetite returns

The FTSE moved higher on Tuesday, easing back slightly from sessions highs in the afternoon session. 

The gains on the FTSE are part of a broader rally across Europe, as well as being down to big moves from individual stocks, such as Smurfit Kappa after it rejected a takeover bid and Intertek following solid numbers; as well as Tesco and Morrisons after a report showed that these two supermarket chains were the fastest growing over the past 12 weeks. 

Wall Street opened with a mild push northwards, rising for the third straight day, with energy stocks and techs leading the way. Positive sentiment is driving trade, as the geopolitical environment improves on the prospect of an inter-Korea meeting and as doubts grow over Trump’s ability to push through the proposed steel and aluminium tariffs.  

North Korea & South Korea to hold summit 

North Korea has agreed to refrain from carrying out any further missile tests, whilst engaging in dialogue with South Korea. North Korea has also expressed an interest in holding talks with the US. These comments were made by Kim Jong Un to South Korea’s national security chief in what can only be described as a complete change in tune from the rogue nation. 

As the geopolitical atmosphere has improved so has traders’ desire for risker assets. Market participants were once again seeking out equities, boosting US stock markets for a third straight day, meanwhile traditional safe haven’s such as the Japanese yen, moved out of favour. 

Following the announcement USD/JPY rallied to a session high of 106.47. 

Fading trade war concerns 

Fears over a trade war appear to be abating as opposition to the measures, even from with Trump’s own party are increasing. 

Whilst trade war fears haven’t been completely erased, its fair to say that there are increasing doubts as to whether Trump will be able to go ahead with such a risky economic policy. 

Fed speaker Bainard to pull dollar lower? 

In the forex markets the dollar is trading broadly lower thanks to a revival of risk appetite and as weak data overshadowed hawkish comments from Fed President Dudley. US factory orders declined in January -1.4% year on year, in line with expectations although markedly below December’s upwardly revised 1.8% increase. 

Market participants will now look towards Fed Governor, voting member and known dove Bainard for direction. The market may not need too much encouragement to pull the dollar lower. 

The greenback is currently finding support at 89.5 versus a basket of currencies, and firm break below could open the door to support seen at 89.25 on route to 89.00. On the upside a break above the psychological level of 90 could see gains extend to the region of 90.90.