The DAX saw major volatility today after the coalition talks in Germany ended badly after the Free Democratic Party walked out of the process. 

Europe

This casts doubt over the future of German politics, as Angela Merkel’s Christian Democratic Union party may be forced to form a minority government or call another general election. The move in Germany reflects the mood across Europe, whereby the older establishment parties are losing influence, and the political spectrum is becoming more fractured. Since Germany is so influential in the EU, the latest development doesn’t bode well for the Continent as a whole. The Germany equity market made a remarkable swing from negative to positive in the day, and the slide in the euro help it.  

In London, the home builders such as Taylor Wimpey, Persimmon and Redrow are in demand ahead of the Autumn Budget in the UK on Wednesday, as traders are anticipating positive news for the sector. Westminster is desperate to fix the housing market, so we could see new incentives for house builders or home buyers being revealed.

Shares in Diploma hit an all-time high today after the company revealed a 19% jump in full-year adjusted pre-tax profits, and an 18% jump in annual revenue. The company is planning on expanding its operations via acquisitions, and it aims to spend £30 million on buy-outs in Europe and North America. The stock is up 10% today, and if the bullish run continues it may target 1300p.  

US

US equities are slightly higher today as the positive sentiment from Europe slipped over to the American session. Traders are still treading slightly lightly when it comes American stocks as debating in Washington DC about the tax reforms are still doing the rounds. Investors are still a bit worried the changes to the tax system won’t as pro-business as Mr Trump promised when he was making his way to the White House.

There were no major economic indicators released from the US today, but on Wednesday the Federal Reserve will report the minutes from the latest meeting. Traders are expecting an interest rate hike in December, but they are more interested in what the Fed might do in 2018. Dealers will be trying to decipher the language of the US central bank to try and figure out how many rate hikes do they plan on doing next year.

Shares in Wal-Mart are down 1.6% after Goldman Sachs cut its rating to neutral from buy. The Wall Street titan believes that most of the value of the stock has already been achieved this year, and that it why it is no longer deemed a buy. The stock hit an all-time high on Friday, and so we have seen some profit taking today.  

 

FX

GBP/USD is up on the day after it was reported that Theresa May is looking to pay a higher ‘divorce bill’ to the EU. Prime minister May appears to be open to the idea of paying more away in order to speed up the negations. Getting support from her cabinet or the general public could be a different story altogether, but for now traders are happy to hear it. The pound has been making headway versus the US dollar since March, and the upward trend is still intact.

EUR/USD has slipped throughout the session and the comments from Mario Dragh, the President of the European Central Bank (ECB) did little to curtail the decline. Mr Draghi is not convinced the inflation rate in the region can sustain itself. It is not the first-time the ECB chief expressed concern about inflation, and the implication is that he additional monetary easing is needed to stimulate the CPI rate.

Commodities

Gold hit a one month high on Friday and has retreated today. The metal finally showed signs of snapping out of the sideways trend it has been trading in lately. The push higher in the US dollar is weighing the price of gold for now. The metal has been broadly trading higher throughout 2017 and if it moves above the October high of $1306, it could target $1334.  

WTI and Brent Crude oil are in the red today as short position on the oil markets are growing ahead of the OPEC meeting in Vienna next week. A report from the commodity and futures trading commission (CFTC) showed there was a jump in the number of short positions last week. Countries like Saudi Arabia have been talking so much about extending the production cut, a lot of that could be already priced in, and now traders are taking their profits.

CMC Markets is an execution-only service provider. 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.