- IMF boosts global growth forecast
- Dax reached new record high
- Some Democrat senators oppose corporate tax hike
European indices finished today's session higher as it seems that investors from the old continent priced in excellent data from the US labor market released on Friday, when most markets were closed. Meanwhile the IMF revised its forecasts for global and euro area growth upwards, mainly due to additional fiscal support in several major economies and the expected vaccine-induced recovery in the second half of the year. The IMF expects the world economy to grow by 6% in 2021, up from its 5.5% forecast in January. On the corporate front, Credit Suisse (CSGN.CH) reportedly fired its top risk and compliance officer and proposed a cut to its dividends as it expects a CHF 4.4 billion fallout from its relationship with Archegos Capital Management. DAX 30 reached an all-time high of 15,224 pts, however later in the session index cut some of its gains and finished 0.7% higher. CAC40 rose 0.5% and FTSE100 gained 1.3%.
Muted trading can be observed in the US as investors are taking a breather following yesterday’s sharp rally caused by the upbeat payrolls report and a record ISM Services PMI. Meanwhile the yield on the benchmark 10-year Treasury fell to 1.66%. The IMF estimated growth of 5.1% for advanced economies this year, with the United States expanding by 6.4%. In the coming days, investors’ attention will focus on negotiations between Republicans and Democrats over President Biden's new infrastructure plan worth $2.25 trillion. Democrats may be able to pass a new stimulus bill via a reconciliation process that does not require a 60-vote majority in the Senate. Instead, a 50-50 result with Vice President tie-breaker vote would be enough to pass a new bill. However this would require support from all of their senators. Meanwhile some of them, including senator Manchin, are not willing to support a corporate tax hike to 28%. Manchin said the highest rate he can accept is 25%. On the data front, job openings reached the highest level since January 2019.
Nevertheless, investors around the world are wondering if indices will continue to move higher, given the start of the economic recovery, huge support from the governments and declining expectations regarding interest rate hikes. On the other hand, there is a risk of overheating, rising bond yields and new taxes. The answers to these questions will certainly be clarified in the coming months.
WTI oil cut some of its early gains and is trading around $59.25 a barrel, while Brent is trading 1.0% higher, slightly below $62.80 as oil traders monitor indirect talks between Iran and the US aimed at reviving the 2015 nuclear deal. Elsewhere gold rose 0.8% to $ 1,742.00 / oz, while silver is trading 1.0 % higher around $ 25.15 / oz as both the US dollar and Treasury yields retreated.
Gold price last week bounced off the major support at $1681. Today price broke above the 200 SMA (red line ) and is approaching local resistance at $1750. Source: xStation5
This content has been created by X-Trade Brokers Dom Maklerski S.A. This service is provided by X-Trade Brokers Dom Maklerski S.A. (X-Trade Brokers Brokerage House joint-stock company), with its registered office in Warsaw, at Ogrodowa 58, 00-876 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. X-Trade Brokers Dom Maklerski S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.