Midday wrap: Europe higher as risk appetite returns, DAX near ATHs

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European markets enjoyed solid gains Thursday as risk appetite returned. But the rally hardly betrays a wanton desire for equities because a) we’re already at or near record highs and b) the selloff had not been especially deep despite US-Iran conflict fears seeing havens enjoy firm bid. Even a shaky ceasefire is enough right now to support the bulls. Stronger-than-expected German industrial production figures (+1.1% vs -1.7% prev and 0.8% est) are helping sentiment, particularly in Frankfurt.

The DAX has led the charge with a 1.25% push higher to 13,485, having earlier touched a high of 13,522. With investors apparently keen to load up on risk with US-Iran tensions easing and a US-China trade deal baked in, we may well see the drive to January 2018’s all-time high just shy of 13,600. Geopolitical risks remain of course with the situation in the Middle East still fluid, but you get the sense the bulls are keen to push this over the line. 

The FTSE 100 added 0.5% to break 7600 with resistance seen at 7675, the high posted Dec 27th.  A softer pound is compensating for the weaker oil price.

Elsewhere US markets are firmer again with the Dow shaping up for a triple-digit gain on the open.

Oil has held just short of $60 with no further losses while gold is also holding the line around $1545. 

In FX, the pound took a drubbing as the market decided Bank of England governor Mark Carney’s comments were more dovish than before. GBPUSD slipped the 1.31 handle to test support on the 50-day moving average around 1.3010. I don’t see much in what he said as particularly more dovish than in the past. Commentary around the likelihood of the UK agreeing a trade deal with the EU before the end of 2020 is also weighing on the pound today. 

Meanwhile, as flagged in the morning note, the bullish engulfing daily candle for USDJPY is resulting in further gains today with the pair moving to 109.50 and momentum in favour of USD across the board. Having cleared the 200-day and other MAs bulls are looking to break the trend line drawn from the falling highs since the swing high of Oct 2018. Big 61% Fib level to cross at 109.60 where we have seen rallies hit a wall several times lately. This level will offer a decent amount of resistance as a result. 

US pre-mkts 

Cowen has come out with a bunch of price target upgrades 

Facebook raised PT to $245 from $240 

Alphabet raised PT to $1575 from $1525 

Twitter raised PT to $34 from $32 

Elsewhere AMD shares are up c2.5% pre-market after Mizuho raised the stock to buy. 

Benchmark has initiated Lyft with a sell rating , price target of $35, which is $10 below yesterday’s closing price. 

Boeing shares are up a touch pre-mkt despite Berenberg cutting to hold. After enjoying a thumping 5% jump yesterday, Tesla shares are a touch softer pre-market after being cut to neutral at Baird, a long-time bull which seems to think the recent rally has run its course. They said: “we would not short the stock and remain positively biased over the long run.” See yesterday’s Equity Strategy: US earnings Q4 preview: Two major stocks to watchfor more on Tesla.

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