Financial market research and analysis

A key index for the Asia Pacific region touched a fresh record high early on Monday, as Asian stocks took their lead from the strong finish by Wall Street on Friday. An encouraging start to the fourth quarter US earning season, plus robust retail sales and a strong energy sector rallying on high oil prices, ensured the US indices experienced anther round of fresh record highs on Friday.

Oil Hovers Around $70

Moving towards the European open, futures are pointing to strong start across the board. The FTSE looks poised to attack a fresh record high on the open, in what is becoming almost a frequent occurrence. Energy firms could find themselves leading the charge northwards, as Brent hovers around $70 per barrel and WTI trades just short of $64.50. Recent drawdowns in stockpiles have tightened the oil markets considerably over the past week and could continue to do so at least in the short term. Furthermore, demand is also looking healthy, supporting the other side of the equation.

In short, fundamentals support the gains. However, $70 feels too high, we know that at these prices US shale production also tends to pick up, so a reaction is expected with shale producers firing back into life. In the meantime, however, we can expect oil majors and energy stocks to charge higher on the stronger prices.

Carillion Looking for 11th Hour Rescue

On the downside, we could expect to see construction firms to be out of favour as fears grow for troubled UK constructor Carillion. Investors will be keen to sell out of Carillion as the market opens on Monday, over fears that the constructing giant could collapse over its £1.5 billion debt pile. This appears to be a simple case of fingers in too many pies – the firm h=over stretched itself.

The Government refused to bailout Carillion, leaving the firm in a last-minute plea with the banks, to help rescue it. This saga risk becoming an embarrassment for the government as Carillion holds a range of government contracts including with schools, hospitals, transport infrastructure etc Therefore the collapse of Carillion could have a far-reaching impacting

Dollar Weaker Despite Stronger CPI

In the forex markets, the dollar continues to suffer at the hands of investors and this was despite core inflation jumping the highest in 11months in December. Sluggishly weak inflation has been a big story for the US over the past 9 months, so the expectation would have been for the higher CPI reading on Friday to boost the buck.

This wasn’t the case and instead the dollar sold off, to the delight of the US stock market which benefited from the weaker dollar, in addition to the encouraging start to earning season.

The US stock markets will be shut today for Martin Luther King Day.

GBP/USD to head for $1.39?

Meanwhile, the pound was taking advantage of the weaker dollar and GBP/USD soared to a high of $1.3749. This is the strongest rate that the pound has traded versus the dollar since it fell 1000 points following the Brexit referendum in June 2016. Reports that Spain and Holland would support a soft Brexit helped boost the pound, and even after the relevant government denied the report, the pound remained buoyant. Now traders will look out to Tuesdays’ inflation reading. Strong figures here could see the pound aim towards $1.39.

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