After the volatility of recent days, equity markets have taken a breather, but the recovery from the lows earlier in the week now seems set to continue. 

  • Powell testimony soothes jittery markets.

  • Risk appetite rebounding across asset classes.

  • Anglo American soars to new decade high.

The mood across equity markets has turned much more positive, following on from two days of testimony by Jerome Powell that has once again reinforced the Fed’s policy outlook. Markets might have had a tantrum over the potential for higher inflation and a sudden change in Fed policy but the head of the US central bank remains as cool as ever, determined to leave everything as it is until the benefits of the recovery have flowed through to all parts of the US economy. This has allowed investors to go back to focussing on the reopening trade, although after the seesaw moves of recent sessions markets are a little tired and are struggling to make much headway. Nonetheless, with the end of the month looming equities seem to have acquired a more positive tone, and with eurodollar and cable on the up as well risk appetite seems to have recovered overall. 

Anglo American has completed its round trip from the 2011 high, having dropped 93% into the beginning of 2016 before rallying 1400% to today’s highs. From the tone of the results it looks like more gains will be in order before long, as the shares eye up the 2008 peak above £33. The group says it is operating near full capacity, another encouraging sign that the global economy is bouncing back in strong form. The sector does not look overly expensive, and will be a key driver of FTSE 100 gains in the coming year as ‘old economy’ stocks look to trounce their tech brethren in performance terms. 

Ahead of the open, we expect the Dow to start at 32,000, up 39 points from last night’s close.

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