It’s been a positive start to the week for markets in Europe, despite US markets tracking lower, with health care helping to underpin the FTSE100, while the DAX continues to make fresh 5-month highs.
Europe
GSK is higher after a phase IIa study on its tuberculosis drug, saw positive results.
AstraZeneca is higher after its Enhertu, Imfinzi and Lynparza combo drugs were approved for use in the EU, with Merck in Germany getting a lift due to its collaboration with AstraZeneca on the Lynparza combo.
Also doing well is Informa Group after reporting underlying revenue growth of 41% year to date., as well as raising full year revenue and profit targets for the full year, upping revenue by £100m and profits by £15m to £490m and £505m.
Ocado has also continued to build on its recent rebound which began on the back of its recent deal with South Korea’s Lotte Shopping.
Amongst the biggest fallers today Harbour Energy is under pressure on reports that we could see a higher windfall tax brought in later this week in the budget statement. This would see the tax increased from 25% to 35%, as well as extending the tax from 2026 to 2028.
If implemented this would increase the effective tax rate for UK profits from 65% to 75%, which the likes of BP and Shell would probably be able to absorb better due to their global footprint, but would be increasingly problematic for the likes of Harbour Energy and EnQuest who make the bulk of their profits from domestic sources.
UK housebuilders are also under pressure after the latest Rightmove House price survey for November showed that asking prices fell by 1.1%, as rising mortgage rates put pressure on valuations. Persimmon and Barratt Developments are amongst the biggest fallers.
US
The rebound in US yields has seen US markets open lower with the S&P500 backing off the 4,000 level late on Friday.
On the upside Advanced Micro Devices shares have edged higher after a couple of broker upgrades.
Cinema chain AMC Entertainments is also higher after the company reported that 4.9m people walked through its doors between Thursday and Sunday to watch the new Black Panther movie, Wakanda Forever, with reported weekend ticket sales of $180m.
FX
We’ve seen a modest rebound in yields as well as the US dollar, after Fed governor Christopher Waller said that the market reaction to last week’s CPI was slightly overdone. That said he went on to say that the next rate hike was still likely to be at a slower pace, which was in line with a lot of the comments last week.
The US dollar has consequently risen back above the 140.00 area against the Japanese yen, after hitting a low of 138.50 last week.
The euro also pulled back from challenging its September peaks at 1.0365/70, which sits just below the 200-day SMA.
The pound has also come under pressure ahead of this weeks budget statement with all manner of reports that the Chancellor will impose new taxes on business that will deter future investment in energy security.
Commodities
Crude oil prices have slipped back, after OPEC cut its oil demand forecast for the rest of this year, and 2023, by 100k barrels, citing concerns about rising inflation and interest rates. Increasing covid cases within China alongside a rebound in the US dollar are also weighing on prices.
A rebound in yields, along with a stronger US dollar is also serving to pull gold prices away from their recent peaks, although the decline is modest.
Volatility
Cannabis stocks advanced ahead of the weekend break, driving price action in CMC’s proprietary basket of licenced marijuana growers. With the Democrats winning control of the senate, progression of legislation for the industry here has the potential to accelerate and that was sufficient to drive one day vol to 118.74% against 103.75% of Friday.
Cryptos remain very much in focus, a theme that’s likely to be exaggerated as the new trading week gets under way following the FTX exchange’s collapse into bankruptcy. Solana was the most active of the digital assets, managing to fight its way off 18-month lows on Friday, although like the rest of the asset class, the market will be watching to see just how big any shake out from here is. One day vol advanced to 380.41% compared to 190.75% on the month.
The DAX index forged its way to five-month highs on Friday, extending Thursday’s gains off the back of that weaker than expected US inflation data. One day vol on the German benchmark sat at 33.13% versus 24.43% on the month, whilst another day of gains for the US tech focused NASDAQ index saw heightened levels of price action reported here too, with one day vol of 42.86% against a monthly print of 36.89%.
Finally Natural gas concluded the week in an erratic fashion. Conservative use of the energy in Europe is driving prices lower and the US Nat Gas cash contract has been trading in a range of as much as 40% since the start of November. One day vol posted 113.78% against 80.43% for the month.
Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
