Dovish Fed speaker provides further boost

• Strong US housing data strengthens markets resolve

• Dovish Fed speaker provides further boost

• Quiet European session likely to see light trading

This week is beginning to looks like a tale of two halves, with yesterday witnessing substantial gains across both US and Asian indices which are now expected to carry on through to the European market today. Driven by an outstanding housing release late into the US session, easing fears that resulted from a poor existing home sales figure on Monday. With European markets virtually bereft of any notable data or economic release today, it is likely that they will follow the lead of the US and Asian markets higher. Futures point towards a positive open, with the FTSE100 +1, CAC +3 and DAX +5 points.

Yesterday’s new home sales figure took markets by surprise, punching the 500k mark to reach the joint highest figure since late 2008. Coming off the back of a period of housing sector weakness, as personified by Monday’s weak existing home sales figure, it looked like we could be in for yet another disappointment, yet in catching the markets by surprise, we have seen a strong bounce across the US indices, which has subsequently fed into the Asian markets, with the Nikkei225 in particular erasing much of the week’s losses.

Meanwhile, Chicago Fed President Charles Evans struck a particularly dovish tone yesterday, discussing how he believes that the FOMC should delay raising rates until sufficient momentum is in place. Evans called for the Fed to be exceptionally patient in their quest to remove it’s monetary stimulus, which was music to the ears of the markets, with the likes of the S&P500 following up on gains seen earlier in the session. This speech reflects to differing opinions within the Fed committee, where concurrent comments from Cleveland Fed Loretta Mester focused more upon changing the current forward guidance towards something which was data driven and could account for both longer and shorter period of time before rates rise. Ultimately, any change from the top will always be expressed in one form or another by members of the committee, the difficulty is deciphering which of the members will get their own way. For the most part it is about finding the consensus and in a week full of Fed speeches, a clear theme of thought hasn’t yet emerged which means we could see yet more indecision at the next FOMC meeting.

The European session is looking completely bare of any major event to move the markets and for the most part, people will be following the bullish gains of yesterday in the US and Asia. Given the impending week ahead, which features the likes of the US jobs report, Eurozone CPI and the latest ECB meeting, it is likely that any moves are going to be tentative as people position themselves lightly ahead of such a key week.