European markets have undergone a subdued start to the week, initially opening higher, however as the day has progressed sentiment has gradually deteriorated, with the FTSE100 rolling over predominantly down to weakness in travel and leisure and the energy sector, as investors trim positions ahead of a big week for central bank meetings.
Europe
Later this week we get to hear from the Federal Reserve, European Central Bank, Bank of Japan, and the Bank of England, who are all set to make key policy decisions, though only the Federal Reserve is set to announce a significant alteration in its policy settings.
Some early week weakness in oil prices is weighing on the likes of BP and Shell, while the new restrictions that are due to start this week is prompting further weakness in the likes of airlines with IAG, easyJet, Ryanair and Wizz Air all sharply lower, after calling for further government support as they look to ride out the effects of the latest set of restrictions. Rolls-Royce and Premier Inn owner Whitbread are also under pressure for the same reason.
With more people choosing to rein back on their social interactions between now and Christmas, we’re also seeing weakness in the likes of Cineworld with the shares slipping to a one year low, while Wagamama’s owner Restaurant Group also sharply lower for the third day in a row. JD Wetherspoons has also slipped back to its lowest levels in over a year, after warning that the new curbs could send the company’s H1 numbers into a loss.
Online estate agent, Purplebricks, who had been scheduled to publish their half year results tomorrow, have seen their shares plunge to a record low, after announcing that it would have to delay their release.
This appears to be due to uncertainty with respect to its lettings business which is under scrutiny on reports some of its clients are facing the risks of fines after an IT error meant that tenancy deposits weren’t registered with the government approved deposit protection scheme, leaving landlords liable for possible fines. The company has said it needs more time to establish how much any potential claims could cost, with early estimates of between £2m and £9m, and possibly even higher.
US
US markets have also rolled over after last week’s positive finish, as the momentum from last week fizzles out ahead of this week's Fed meeting, which is due to start tomorrow.
Airlines and travel stocks are acting as the main drag, along with energy in the same way as in Europe, with big declines in the likes of American Airlines and United Airlines. We’re also seeing falls in the likes of cruise lines as well with Royal Caribbean and Norwegian Cruise Lines.
Pfizer announced today it has reached a deal to buy Arena Pharmaceuticals for $6.7bn, which it plans to finance by paying cash. Given the windfall from its Covid vaccine it certainly isn’t short of money, as it moves to bolster its presence in the areas of gastroenterology, dermatology, and cardiology which Arena has expertise in.
Apple appears to be on the cusp of becoming the first $3trn company as it opens at another new record high, after being upgraded by JP Morgan Securities, raising their price target to $210.
We’re also seeing gains in the likes of Lucid Group after it was announced it will be included in the Nasdaq 100 later this month.
FX
The US dollar is once again leading today’s gains in the currency markets, with the likes the Australian dollar, and Canadian dollar being the worst performers.
With the Federal Reserve due to start their two-day meeting tomorrow, there is a rising expectation that the FOMC may well move towards a faster taper than is currently being priced, which is helping to support the US dollar, as well as some risk aversion buying.
Commodities
While natural gas prices have continued to move higher, crude oil prices have slipped back, as concerns over tighter restrictions over the Christmas period tempers expectations over demand in the next few weeks.
Gold appears to be stuck in a range ahead of this week's Fed meeting, and likely to remain so until it becomes clearer as to how quickly the Fed is likely to accelerate its tapering program when the FOMC concludes its meeting on Wednesday.
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