Stocks in Europe got off to a positive start, but the positive momentum ran out of steam, although the DAX and CAC 40 are now off the lows of the session. 

Europe 

European equity markets haven’t fully recovered from the sell-off I November, and any attempts we see to try and push higher are often short lived.  

Legal & General issued an encouraging trading statement today as the investment management, general insurance, and written premium businesses have all improved on the year. The company expects to post a record profit this year. The share price is down 0.6% today, but has been in an upward trend since the fallout of the EU referendum, and it appears the positive run will continue.  

GVC Holding declared it is in advanced talks with Ladbrokes Coral about the possibility of acquiring it. If the deal goes ahead, it could be worth £3.9 billion. The government is looking into the fixed-odds betting business, as they feel it is too addictive. Depending on the outcome of the investigation, the takeover may not go ahead as it deeded to be an important factor in the deal. GVC is up 5.3% and Ladbrokes is higher by 31%.

The mining sector is under pressure as iron ore futures and coke futures in China fell by 7.5% and 8% respectively – both hit their daily downward limit. Traders were concerned about declining demand during winter. Stocks like Rio Tinto, Anglo American and Vedanta Resources fell today.  

 

US

We are seeing money flow back into US equity markets as the Dow Jones, S&P 500 and NASDAQ 100 are in positive territory today. The American equity markets have gone through a bit of a lull recently, but investors are still hopeful the US government will back the tax reforms proposals. This could be the beginning of the next leg higher for the US indices.

US jobless claims fell by 2,000 to 236,000 last week, and the consensus was for a rise to 240,000. Yesterday, the ADP employment report came in at 190,000 – broadly in line with market estimates. Both were sold reports and puts dealers in an upbeat mood ahead of the US non-farm payrolls tomorrow.

 

FX

EUR/USD hasn’t moved much today and even though Germany announced poor industrial output figures, it failed to get a major market reaction. In October, Germany saw industrial outputs fall by 1.4%, and dealers were expecting a 1% rise, and that compares with the 1.6% drop in September.

The US dollar index hits its highest level in over two weeks today as dealers remain optimistic about tax reform.

GBP/USD is softer on the session as questions still hang over the government’s position when it comes to the Brexit negotiations. The talks are being held up over discussions in relation to the Irish border, and until there is progress on the issues, it is possible the pound could remain under pressure. The wider upward trend that has been in place since March is still intact, so further decline could encourage fresh buying.

 

Commodities

Gold has fallen to a four month low as a strong US dollar has hurt the metal. The inverse relationship between the two markets seems to have kicked in. We are less than a week away from the Federal Reserve meeting, and dealers are expecting interest rates to be hiked by 0.25% to 1.5%.

Bitcoin crossed the $16,000 mark today and the roaring market is showing no signs of cooling. Some traders are claiming the cryptocurrency is drawing funds away from traditional assets like gold, which could explain the sharp decline in the metal.

WTI and Brent Crude have bounced back from the decline the decline they have suffered since last Friday. The energy market is trying to make up its mind over its next move. The long awaited OPEC and Russia deal to extend the production cut until the end of 2018 was revealed last week, and since then there has been chatter that shale producers in the US will increase output.

Oil has been in a solid upward trend since June and if it holds above these levels it is likely to continue pushing higher.

 

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