The EU continue to be at the kernel of political uncertainty.

Europe

Rome and Brussels are still locked in a political fight over the budget, and we are no closer to a resolution. The Italian government are holding their ground, and the EU have stated that there will be penalties. The longer this continues, the more likely investors will become nervous. The EU needs to be mindful that Italy has the third-largest bond market in the world, and a spike in yields could trigger a debt crisis. Theresa May and the EU have agreed a deal ‘in principle’, but issues like Gibraltar and fishing rights have yet to be fully finalised. It’s all well and good reaching a deal with the EU, but getting it passed in parliament is a different story. Theresa May is speaking in the House of Commons at the moment.  

Centrica shares fell today after the company said that it lost 372,000 customers in the four months until October. The energy firm lost 341,000 clients in the first six months of the year, so today’s figures show the company is losing clients at a faster pace. There has been a significant increase in the number of energy providers in the last seven years, and that is great for members of the public, but it has been dreadful for Centrica. The stock gapped lower this morning, which is a negative sign, and if the recent bearish move continues it might target 123p.

Mitchells and Butlers announced a 68% jump in full-year pre-tax profits. Like-for-like (LFL) sales on the year increased by 1.3%. The firm decided against paying a final dividend as the company wants to use the cash for investments. The group issued a cautious outlook as they described the environment as ‘challenging’.

Rotork shares sold-off today after the firm issued a mixed third-quarter trading update. Revenue for the period jumped by 8.4%, but group order intake dropped by 4%, and the latter rattled investor confidence. The stock has been in decline since August, and if the negative move continues it could target 250p.

Severn Trent revealed a solid set of first-half figures. Revenue increased by 3.6% and profit rose by 1.4%. The interim dividend was raised by 7.9%. The company confirmed that roughly 95% of the £870 million worth of efficiencies in the first-half were achieved.

US

The New York Stock Exchange is closed today as the US celebrates Thanksgiving. 

FX

The US dollar is lower today as traders are a little less fearful that the Federal Reserve are going to pursue an aggressive monetary tightening policy in 2019. The markets are still pricing in a high probability of a rate hike in December, but beyond that, it looks a little less clear. Some of the economic indicators from the US recently have been soft, and this suggests the economy is cooling.

GBP/USD was jolted higher by the news that the UK and the EU have agreed to a deal in principle. Some of sterling’s gains were handed back, when traders started to wonder how likely the deal will get passed at Westminster. The agreement appears to pro-business, which is why we are seeing an upward move in the pound. Given that there would be deep cooperation between the UK and the EU post-Brexit, the deal might not get approval in London.

EUR/USD has been assisted by the drop in the US dollar. The latest French business climate index report climbed to 105, up from 104 in October. Last month’s report was the lowest reading in nearly two years, so in the grand scheme of things, sentiment is still soft. 

Commodities

Gold has been boosted by the dip in the US dollar. In recent months, the metal has been enjoyed an inverse relationship with the US dollar, and this is playing out today. To a lesser extent, the weakness in global stock markets has also assisted the commodity, as traders seek out assets that are deemed to be safe-havens. If the recent upward trend continues, it could target $1,243.

Oil has experienced low volatility today thanks to the absence of most US traders. There are still concerns about the US’s rising inventory of oil, as well as fears about future demand in light of slowing growth in China. OPEC will meet next month, and there is talk of a production cut, but the Saudi’s are under pressure from Trump to keep prices down. 

 

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