FTSE 100 underperforms, US-China remains in focus, dollar rally fades

CMC Markets

FTSE 100 is underperforming today as there is a broad sell-off in financial, mining, energy and consumer stocks. 


The US-China trade story continues to dominate the headlines as the latest twist in the story is the Hong Kong bill – where the US government essentially backs the citizens of Hong Kong. Beijing don’t want to see the Trump administration stick their nose in domestic matters, so dealers are worried it might derail the trade talks. Apprehension about what will be China’s next move is stopping traders from buying into the market.     

Ocado confirmed they struck a deal with Aeon, Japan’s largest supermarket group. It was the first deal signed with a company in Asia so the group’s global presence is on the rise. The London-listed company have set their stall out as a specialist in online grocery sales, and it has paid off as it has stuck deals with companies in France, the US, Canada, and Australia.  Not only should the Aeon move boost revenue, it should also boost Ocado’s reputation around the world, which might help the firm broker further deals around the global.  

Virgin Money shares rallied yesterday even though the group had to cancel its dividend due to a cost attributed to the mis-selling of payment protection insurance (PPI). The finance house took a charge of £385 million in relation to PPI. The management of the group gave off the impression is it over the worst of the PPI costs, but some traders are questioning the size of the move in the past two days. It seems odd that sentiment is so bullish in light of the fact the dividend has been stopped. The stock is higher today also.   

Daimler shares are in the red after the group confirmed it will cut at least 10,000 jobs globally. Car sales around the world have cooled, and the push for electric vehicles is a factor behind the move too. The drive to be become more environmentally friendly is a trend that is likely to stay around for some time.   


The Dow Jones and S&P 500 are lower due to concerns about the US-China trade situation. The US market will operate on a half-day today, and volumes are likely to be low as yesterday was Thanksgiving.    

Black Friday sales have kicked off today and shoppers will be looking ahead to Cyber Monday next week. The latest durable goods report from the US was well received, and even though the Conference Board consumer confidence reading has cooled it is still well above the levels registered in 2016. US workers are seeing their wages rise at a level that exceeds the CPI rate so they are getting a nice increase in real wages, so they might be inclined to seek out bargains. Retail stocks like Amazon, Kohl’s, Target and Best Buy are mixed.       

Tech Data has agreed to be taken over by Apollo Global in a deal that was worth $5.14 billion. It equates to $145 per share. The original offer was $130 per share by then Apollo upped their bid. The stock is higher on the back of the news.   


The US dollar index hit a level last seen in mid-October even though there were no major announcements from the US today. Earlier this week it was revealed the US economy grew by 2.1% in the third-quarter, which was an improvement on the growth rate of the prior quarter, so that could be a sign the Fed will keep rates on hold for many months to come. The greenback has handed back most of its gains.

EUR/USD has been hit by the strength of the greenback ever though the eurozone posted positive inflation data this morning. Headline CPI came in at 1%, exceeding the 0.9% forecast, and it was a decent improvement on the 0.7% posted last month. The core CPI report was 1.3%, which was an increase from the 1.1% registered in October.

GBP/USD has also been hit by the move higher in the US dollar. UK mortgage lending jumped from £3.84 billion in September to £4.3 billion in October. The rise in mortgage lending in the month when the UK was supposed to leave the EU suggests the public where not afraid of the potential political uncertainty.   

USD/CAD is higher on the day even though the Canadian economy grew by 1.3% in the third-quarter, topping the 1.2% forecast. The fact the greenback is up on the day versus the Canadian dollar even though the growth numbers were well received underlines the strength of the greenback.   


Gold has been dragged around by the US dollar. The inverse relationship between the greenback and the metal is playing out today. The recent turnaround in the dollar has pushed gold into positive territory. The asset has been pushing lower for two months and if it continues it might target $1,445.

WTI and Brent crude are in the red today as energy traders are a little concerned about the trading relationship between the US and China. Trump’s support for the Hong Kong bill has the potential to upset the apple cart, and dealers are exiting the oil market as a precaution.