The FTSE 100 was being assisted by the weakness in the pound, bit now has slipped into the red. 

Europe

The London index is comprised of a lot of companies that rely heavily on international business, so the softness in sterling is boosting some of the companies that make up the FTSE 100.

The DAX and CAC 40 are in the red as traders are still a bit nervy when it comes to the Continental markets. The German and French equity markets have been subdued for the past couple of weeks. Traders can’t seem to make up their mind whether to buy back into the market, or cash in their positions before year-end.

Goldman Sachs wrote an optimistic note about the UK supermarket sector, and in turn we have seen a push higher in the share price of Sainsbury’s, Tesco and Morrisons. The investment bank stated that Adli and Lidl are no longer as aggressive as they once were when it comes to slashing their prices. Goldman Sachs predicts that profit margins will improve next year, as they feel the gap between consumer prices for foods and input costs are falling.  

Shares in Provident Financial are down 10.4% after the Financial Conduct Authority (FCA) stated they will investigate their Moneybarn business. The regulator will look at how the company assess ‘customer affordability’ for vehicle finance. The FCA is already investigating Provident Financials credit card operation – Vanquis. While the investigations are ongoing, investor sentiment is likely to be negative.

US

The Dow Jones and S&P 500 are largely unchanged on the day after the US Senate voted in favour of bringing the tax reforms that President Trump proposed. Cutting the corporate rate, and encouraging American companies to reopen operations in the US was a major part of Trump’s Presidential campaign. Investors feel the move will stimulate business activity in the medium to long term.

The NASDAQ 100 is outperforming the Dow Jones and S&P 500 are dealers are buying into tech stocks today since they have a rough couple of trading sessions recently. The sector could stand to gain massively from the changes to the tax reforms as companies like Apple, Alphabet and Microsoft could bring offshore funds back to the US.

FX

GBP/USD is weaker on the day as political uncertainty is still going the rounds when it comes to the Brexit talks. The British government appears to have reassured the Democratic Unionist Party (DUP) that there will be no customs border between Northern Ireland and Great Britain – and for now talks are not progressing. While the political outlook remains unclear, sterling could remain under the cosh.

EUR/USD has been hit by the rally in the US dollar – which is being driven by the US Senate’s vote to back the tax reforms. The US government has taken one step closer to cutting the corporate tax rate to 20%. Dealers are viewing the move as very pro-business and in turn snapping up the greenback.

France and Italy posted solid services reports but it failed to stem the slide in the single currency against the US dollar.  

Commodities

Gold has fallen to level not seen since late October as the push higher in the greenback has hit the hurt the metal. Gold even traded below its 200-day moving average at $1266 – it hasn’t traded below that metric since July. If gold breaks below the October low of $1261, we could see it retest the $1244 area.

Copper has fallen over 3.5% as stockpiles of the red metal rose at a London Metal Exchange (LME), registered warehouse. The growing inventories suggest weaker demand, and this has rattled traders.

WTI and Brent Crude are both bouncing back after a decline yesterday. The energy market was boosted at the back end of last week when OPEC and Russia decided to extend their production cut to the end of 2018.

The move by OPEC and Russia has prompted Goldman Sachs to raise their price target for Brent Crude to $62 and to $57.50 for WTI, for 2018. Even though both oil contracts are trading above those price targets at the moment, the raising of the price target still sends out a positive message.  

 

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