After much consolidation over the past few sessions, we have got a big lift this morning in stocks. There seems to be no major news fuelling this rally, but as I said yesterday, for now there seems no letting up in this rally. The huge rally from the low still holds which is lead by commodity related stocks, and technology. Commodities have continued there rally with oil trading above 71 bucks, as the dollar continues to weaken.
Personally I have been taken back by the strength of this rally as have other most likely. Here are some reasons why courtesy of Bloombergs Matthew Lynn;
The Savings Story: People are putting money aside again... With interest rates close to zero, there’s no point keeping it in the bank. Instead, a wall of money is about to descend on the market, creating huge demand for equities.
The Inflation Story: ...You don’t want to be holding cash while inflation makes it less valuable by the day, and central banks keep creating more of the stuff. Instead, investors will switch into real assets that can hold their value, such as stocks, real estate or commodities.
The Takeover Story: The last rally was all about the emergence of the BRIC economies. This one will be about them buying North American and European assets. The rising BRIC giants are going to need technology and brand names, and they will want to buy them.
The Shareholder Story: In the coming years, capital will be in short supply. The only place that companies will be able to get it will be from their shareholders. In return, they will have to be rewarded with higher dividends and stock prices.
Well there you go, hard to tell when we will stop.
On the Euribor front, front month spreads continue there march upwards with Mar10-Jun10 hitting highs of 29.5 and Jun10-Sep10 trading 30s. These spreads have risen over 6 full ticks in the past few sessions. Quite a frightening move, just like the stock market, there seems no end to how high it will go.
Bunds hit my first target of 118.43 yesterday, it has since then come off slightly, but 119.16 still remains the next target.
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