The Italian situation has improved a little as now there are reports that the administration in Rome is open to the idea of running a smaller budget deficit than planned. 

Europe

The anti-establishment coalition are contemplating running a budget deficit of 2% or 2.1% in 2019, and that compares with the 2.4% deficit that was previously proposed. The news has taken pressure on the Italian government bond market, and in turn it has helped Italian banking stocks. This might be a ploy by the Italian government to keep the spotlight off the government bond market while they are trying to get the budget passed in parliament.

To a lesser extent, the news over the weekend that EU leaders endorsed the deal for the UK’s exit of the bloc has also lifted investor sentiment. Traders are clinging onto the possibility that Theresa May will get enough support to get the deal approved. Mrs May will have an uphill struggle, but some MPs might vote in favour of it as they are too scared of no-deal scenario.

Melrose shares are in the red after the company received a lower than expected bid for a business it is selling off. The group was hoping to sell GKN Power Metallurgy for roughly £2 billion, but bids last week valued the unit closer to £1.6 billion. Melrose, a turnaround specialist, acquired GKN, with the view to restructuring the firm, and now it seems that things are not going according to plan.

Flybe shares are flying high again as there is talk of a bidding war for the struggling airline. Last week we heard that Virgin are interested in acquiring the airline, now there is a report that BA’s owner, International Airline Group, are interested too. 

The rebound in the oil market had lifted the price of energy stocks like BP, Royal Dutch Shell, Tullow Oil and John wood Group.

Lamprell shares are in demand on the back of the news that the company has been awarded a contract with Saudi Arabia’s Aramco. Lamprell are a part of a consortium which put the bid in, and the contract will last up to six years, and investments could top $3 billion per year. 

US

The Dow Jones, S&P 500 and NASDAQ 100 have all bounced back today and the success of Black Friday is playing into the positive move. According to Adobe Analytics, it was a record Black Friday, and the group is also predicted that today, Cyber Monday, will also set a record.  Amazon, Best Buy, Wal-Mart and Target are all higher today as speculation that shoppers will be availing of bargains ahead of Christmas.    

General Motors shares are higher after the company announced an aggressive restructuring plan. The group aims to trim North American salaried staff by 15%. The company will continue to hire new staff, it will just seek different skill sets.

FX

The dollar index has cooled today as dealers are a little fearful that the Federal Reserve will continue down the hiking path. The markets are pricing in a high probability of an interest rate hike next month, but looking to 2019, traders feel the Fed might take a less aggressive stance.

EUR/USD has been helped by the reports out of Italy that they are considering altering their budget deficit, and the softer US dollar is helping too. The euro was hit when Italian bond yields were rising, and now the opposite is the case. Mario Drahgi, the head of the European Central Bank, said the economic slowdown might be temporary, and added that significant monetary policy stimulus is still needed. 

GBP/USD is higher for now as traders are a little optimistic that Theresa May will get her deal approved. The pound is likely to hold-up while there is an absence of ‘no-deal’ chatter. Should there be a ramping up in opposition the proposal, that would likely hurt the pound as it would open up the possibility of a no-deal situation. 

Commodities

Gold has been given a boost on the back of the dip in the greenback. The metal has experienced low volatility in recent months and today’s move of 0.03% is typical for the commodity.  Gold has lacked direction in recent weeks, but while it holds above the $1,200 mark, it might retest the $1,243 area.

Oil has rebounded as short covering and bargain hunting has driven the price higher. The energy might be moving higher today, but the backdrop is still very negative. Concerns about supply persist. That being said, there is speculation that OPEC will announce production cuts at their meeting in December.

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