Wall Street opened positively this afternoon – the Dow was up 76 points by 3.30pm in London, passing 10,320 to reach a new year-high after a spate of Dollar weakness.

In London this afternoon the FTSE also reached an intraday high for 2009 as unemployment levels came in better-than-expected, with the rise of 12,900 out of work considerably better than the forecast of 20,000. The index briefly breached 5300 before retreating slightly.

As was the case on the European markets, the US rally today was led by financial equities. Bank of America, which saw its share price up 3.49%, was heading the leader board after an hour of trading. American Express was also trading strongly, with a gain of 1.89% by 3.50pm (London time).

China today hinted that it may allow appreciation of the Renminbi as it faced international criticism for keeping the currency undervalued. The country also reported a higher-than-expected trade surplus and a healthy credit situation, indicating that the nation’s economic recovery remains on track. All this news will have helped the Dow today.

However, the underlying catalyst for strength in the US equity markets seems to be the weakness of the Dollar. It fell to a 15-month low today, encouraging traders to turn to equity markets as interest rates look set to remain at record lows on both sides of the Atlantic.

Dollar weakness will also have the knock-on effect of driving up commodity prices, which again increases the relative attractiveness of equities.

The other side effect of the Dollar’s weakness was an extension of gold’s run. Spot bullion reached a record level of $1,117 per ounce as investors favoured its relative stability.

Other metals benefited from this rally, with copper, nickel and zinc all adding between 1.6% and 2.1% today.

This strength was played out on the FTSE, as miners led the UK market’s rally today.

Oil prices also rose gently, with Nymex gaining 51 cents a barrel to reach $79.56.

By Anthony Grech, Research Analyst, IG Index.

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