In the absence of US markets for Presidents Day it’s been a quiet and subdued session for markets in Europe with little in the way of direction, as the FTSE 100 holds steady in and around the 8,000 level.
Europe
We’ve seen resilience in the basic resource sector on the back of firmer metals prices, with copper and aluminium prices getting a tailwind from optimism over a reopening of the Chinese economy and a pickup in economic activity. Anglo American and Rio Tinto are among the better performers on the back of firmer iron ore, aluminium and copper prices. Oil prices are also slightly firmer on the back of a weaker US dollar.
On the downside, packaging company DS Smith is lower after being downgraded by Bank of America on expectations that the sector will be at risk of weaker demand, which will then result in lower prices for packaging in the back half of the year. This has also resulted in some weakness in the likes of Smurfit Kappa and Mondi.
US
US markets are closed for Presidents Day.
FX
It’s been a subdued day for currency markets with little in the way of direction, although the Australian dollar has edged higher ahead of the release of tomorrow’s central bank minutes as well as the latest manufacturing and services flash PMI numbers for February.
Commodities
Crude oil prices have started the week by edging higher, after dropping to a one week low last week, with a slightly weaker US dollar providing an element of support. Last week prices fell back on concerns that demand in the US was slowing after some big weekly builds in inventory supplies.
Gold prices hit their lowest levels since early January at the end of last week, before recovering some ground as US yields back off from their recent highs. With rates markets now pricing out the prospect of a cut in rates before the end of the year, gold prices have lost some of their recent lustre. A hawkish set of minutes later this week could tarnish gold's prospects further if the hawkish narrative from last week carries over.
Volatility
Select UK banks found themselves in focus on Friday, led by earnings news from NatWest. The high-street lender may have posted bumper profits, but painted a bleak outlook for the year ahead, something that served to knock well over 6% off the share price, driving one-day volatility to 49.93% against 28.84% on the month. Fears that peer Lloyds Banking Group will paint a similar picture in its results due later this week also took a toll, with the underlying finding itself under pressure and one-day volatility coming in at 49.22% against 32.95% for the month.
Palladium prices remained soft ahead of the weekend break, sitting close to three-and-a-half year lows. There’s concern of weakening demand for the precious metal, with car manufacturers switching to alternatives and overall vehicle production levels falling, too. One-day volatility on the commodity sat at 58.61%, against a one-month print of 50.46%.
Better-than-expected UK retail sales data published on Friday was sufficient to leave cable as a rare source of price action in fiat currency markets. With the UK also having just avoided slipping into a technical recession last week, the pound was able to retake the 1.20 level off the back of this news. One-week volatility came in at 10.86%, a little ahead of the month’s print of 10.69%.
And in cryptos, speculative buying was seen as being behind gains ahead of the weekend, despite that more focused narrative from regulators over management of the sector. One-day volatility on bitcoin hit 59.33%, up from 40.25% on the month.
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