All Trade Ideas and trading scenarios found on FX360.com are hypothetical. FX360.com has not placed these Ideas in a live trading environment. Forex Trading involves high risks, with the potential for substantial losses that exceed your initial deposit and is not suitable for all persons. Past performance is not necessarily indicative of futures results.

US Pre-Open Call

Last updated 6/29/2012 4:50 AM ET (GMT -5) 0 Comments - Add your comment

• Share this:

David Morrison

Market Strategist, GFT

Follow @DMorrison_GFT

US stock index futures have soared in early trade this morning, moving in line with other global equity markets. The rally follows overnight news from the EU Summit. Euro zone leaders have agreed to take emergency action to drive down Spain and Italy's borrowing costs. Funds in the existing European Financial Stability Facility and those in the proposed European Stability Mechanism could be used to buy bonds directly in troubled countries to bring down yields. On top of this, countries benefiting from the bond-buying will not be subject to additional austerity measures, and bonds bought by the ESM will not be more senior to existing debt. This agreement has also paved the way for a 120 billion euro growth package - something that Spain and Italy were holding back from until a deal of supporting their respective bond markets  was reached. So now we're seeing a strong "risk on" rally, chiefly because most investors believed that Europe's leaders would fail to reach any form of accommodation. But the agreement is little more than a temporary patch-up. There is around 200 billion euros left in the EFSF, and the ESM fund (which still has to be ratified by a number of euro zone countries - including Germany) is expected to stand at 500 billion euros. However, it is worth remembering that the ESM is a leveraged fund with only 80 billion euros of paid-in capital sitting in it. The rest is made up of pledges from euro zone countries with Germany set to contribute 27%, France 20%, Italy 17% and Spain 12%. Other would-be contributors include Greece, Ireland, Portugal and Cyprus - all countries which are hardly in a position to contribute anything to anyone. Today, European leaders will look further out on the time horizon, and are expected to make commitments to moves towards a closer fiscal and political union. In other news, yesterday the US Supreme Court upheld President Obama's individual health insurance requirement provision . This was a surprise, and weighed on equities in general as its raises business costs and is likely to discourage small companies from hiring full-time workers. Interestingly, the Supreme Court sees the requirement as a tax, while the President doesn't. Republican presidential candidate, Mitt Romney, has said that that he will immediately work to repeal the law if he wins the November election.So today's trading session is the last of the second quarter. Next week, with Europe less of an immediate concern, investors will look ahead to the US earnings season. Companies have been busy downgrading expectations, yet it could still prove to be a difficult summer if US corporate profitability looks like it is sagging.

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Futures & Forex, Ltd. (“GFT Markets”) and FX360.com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

The views of the authors and analysts are not necessarily those of GFT Markets, its owners, officers, agents or other employees. FX360.com and the currency research team will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on FX360.com. GFT Markets and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

Loading...

About The Author

David Morrison has worked in financial markets for over 25 years. He joined GFT in February 2009 to deliver commentary and research for derivatives products. Before then David had been instrumental in setting up two spread betting companies, managed trading desks, and implemented and ran successful risk-management strategies.

He has appeared on Bloomberg, Reuters, and Sky TV, and is widely quoted by financial newswires. He has written numerous articles covering economics and trading strategies using fundamental and technical analysis.