Asian markets finished mostly higher on Tuesday as investor confidence across the region runs high. The best gains came from South Korea, where a 4.4% surge in shares of Samsung lifted the Kospi to a 1.6% gain as investors there returned to markets for the first time since September 29th. Australia was flat, but Japan’s Nikkei made a modest gain as it continues to close in on a 21-year high. Chinese markets reversed early weakness and both the Shanghai Composite and Hang Seng ended the day in positive territory.
European markets slid lower Tuesday, with the Spanish IBEX 35 suffering the worst loss, with investors preparing themselves for a speech from Catalan President Carles Puigdemont. The caution arose as he was expected to call for independence from Spain, but instead he called for a delay in the independence movement and suggested talks with Madrid might be a better option. European markets will almost certainly rally higher today in a relief rally. The U.K. markets ended higher, as investors there were able to shrug off the potential independence call in Catalonia, and focused instead on an upgrade of the banking sector by Credit Suisse.
U.S. markets overcame early weakness to end the day broadly higher, with all three of the major stock indices posting new record closing highs. Improved investor sentiment ahead of earnings season was highlighted as a major reason for today’s gains, as there was no economic news to send markets higher. The consumer staples sector outperformed as shares of WalMart led the Dow following a statement from the company at an investor meeting in which it said it will continue to focus on domestic growth and ecommerce.
The pair spiked higher on Tuesday, retaking the 1.1800 level as traders speculated on the possibility of an end to the QE program in the European Union. Rumors have been circulating since the end of the summer regarding the potential timing of the European Union ending its bond buying program, and with the U.S. Fed recently announcing it will begin unwinding its bond portfolio it can’t be long until the European Central bank does the same.
The weakness in the USD hit this pair early Tuesday, sending it crashing below the 112.00 level, only to later recover and trade back above that key support level. The pair has been testing the 112.00 level for support for over a week, and it continues to hold, but likewise the 113.00 level has held as resistance, leading to a sideways move in the pair that sees no end currently.
Cryptocurrencies continue their steady climb higher on Tuesday, with Bitcoin briefly touching the $4,900 level, while Ethereum topped the resistance at the $300 level and Litecoin traded solidly above the $50 level. Ripple also gained, recovering some of the weekend gains that were lost in Monday’s session. Traders ignored news that Russia may ban cryptocurrencies, focusing instead on the long-term potential of the technological advance.
Precious metals gained for a third session in a row Tuesday as the U.S. dollar index continued to exhibit weakness. Traders are still bidding up the precious metals in response to last Friday’s weak U.S. employment report. With gold still below the $1,300 level however, it may not be an actual rally we are seeing, but just some consolidation before the next leg lower.
Crude rallied higher Tuesday to score a second consecutive winning session. Talk of a more balanced market from Saudi Arabia, a pledge to continue production caps, and the slowdown in the U.S. production due to hurricane Nate all helped lift U.S. WTI crude back above the $50 a barrel level.
With Tuesday’s record finish the Dow has now seen 46 record closes this year, which is the most in a single year since 2013, when the index posted 52 records. Additionally, it is on track to soon hit the 23,000 level for the first time ever, marking the fourth such 1,000 point milestone this year, and the third fastest time the Dow has cleared 1,000 points. Investor confidence over improving economic data and the resurgence of expectations for tax reform later this year has helped push the market higher, and could continue to do so through the end of the year.
The Spanish benchmark index fell 0.9% on Tuesday, dragged down by losses from the banking sector, but also seeing broad based weakness as investors were preparing themselves for a call for independence from Catalonia. Instead the Catalan president called for talks with Madrid and delayed the question of independence. We should see a strong rebound in the IBEX 35 today, especially from the banking sector, which has been under extreme pressure since the independence referendum.
Bank of America
Earnings season kicks off today with a host of financial companies reporting. Bank of America doesn’t report until before the bell on Friday, so traders can get a look at the earnings of some of the sector peers such as Wells Fargo, and possibly get a feel for what to expect from Bank of America. Earnings have been trending higher over the past three years, and investors are expecting good things when Bank of America reports on this quarter as well. Note that revenues at the bank have been flat, but earnings are growing solidly thanks to growth in the loan and deposit balances.