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The FTSE 100 has slipped into the red after reaching a new record high this morning, as traders take their cash off the table ahead of Christmas. 

Europe

The London market won’t reopen until Wednesday 27th December so investors are locking in their profits now. The British equity benchmark enjoyed a positive run this week, as it closed above the 7600 mark yesterday – for the first time. Next and Diageo were popular this week with investors as the Christmas shopping spree boosted the share price.

The IBEX 35 was plunged into the red after the Catalan separatists won the majority of seats in the regional parliament. Madrid imposed direct rule on Catalonia in October, and it called a snap election as a way of settling the independence issue. Prime Minister Rajoy misjudged the situation, and thought the silent unionist majority would back parties that favour the status quo, and now his plan has back fired. The Independence movement now has a more legitimate claim.

US

US equity markets are a mixed bag and haven’t move much in early trading. Investors breathed a sigh of relief last night when the US government bought themselves more time to deal with the government shutdown. The US government is funding until mid-January, and last night’s move was a quick fix and the issue will have to be addressed in the New Year.

The core personal consumption expenditure (PCE) index for November ticked up to 1.5%, meeting expectations, and that compared with the October reading of 1.4%. The core PCE index is the Feds preferred measure of inflation, and we are now seeing signs of it creeping it higher. The cost of living in the US has been edging up at a slower rate than then Fed would like, but if major companies like Wells Fargo and AT&T pass on higher wages in light of the US tax reform, we could see the rate improve in 2018.

US new home sales in November jumped to 733,000 from 685,000 in October. It was the highest reading of new home sales in over 10 years. This is in line with the other housing data updates from the US this week.

FX

EUR/USD is under pressure in the wake of the Catalan election. Traders despise uncertainty and the political upheaval in Spain is prompting them to sell the single currency. The referendum didn’t put the Catalan question to bed, it has now put it front and centre of Spanish and European politics. Political rumblings are not just unique to Spain, in October two Italian regions voted for more autonomy. Dealers are mindful that other nationalist movements could pop up around the Continent.

GBP/USD is largely unchanged on the day as the ground that was made on the back of the strong UK GDP figures has been handed back. In the third-quarter the UK economy grew by 1.7%, while traders were expecting a reading of 1.5%, and the previous reading was revised upward to 1.9% from 1.5%. It is slightly worrying that the impressive growth figures didn’t spur more buying, but the wider trend is still upward.

Bitcoin has come under intense selling today, and it dropped below the 11000 mark. The cryptocurrency has dropped over 40% from its all-time high, which was reached on Sunday.

Commodities

Gold hit a level not seen for over two weeks as the metal continues its positive run. The metal has been gaining ground since the Federal Reserve hiked interest rates in the middle of the month. Gold rallied after the US rate hike in December 2016 and December 2015, and it appears that history is repeating itself.

Some investors have been stating that Bitcoin is an alternative investment to gold, and now that the cryptocurrency is enduring a severe sell-off, the gold market is pushing higher. 

WTI and Brent Crude oil are experiencing low volatility, like they have been for most of the month. The oil market had a choppy summer and autumn on the run up to the OPEC meeting in late November, but since then it has been smooth sailing. The energy market is creeping higher and we could retarget the December highs before the year is out. 

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