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Mixed start to the week as investors mull US data and China reopening

It’s been a mixed start to the week as investors look towards the recent change of emphasis on a reopening of China’s economy away from its zero-Covid approach.


This more pragmatic approach to Covid by the Chinese government appears to be prompting optimism about the pace of a possible reopening with the likes of Prudential seeing further gains on top of last week’s strong performance, and helping to provide an uplift to the FTSE100.

Optimism over metals demand has also seen a strong day for miners with Anglo American, Rio Tinto and Glencore edging higher. Glencoreshares are also gaining after the company agreed a $180m settlement with the Democratic Republic of Congo over allegations of corruption between 2007 and 2018. The agreement also states that the company will continue to observe the measures agreed with the US Department of Justice, in line with Congolese law.

While the FTSE100 has outperformed there is some evidence after eight weeks of gains that the likes of the DAX and CAC40 might find further upside progress hard to sustain as we head towards year end.

Vodafone shares initially ticked higher after it was announced that CEO Nick Read to step down at the end of this year after a tenure that has seen the company’s share price almost halve. Shareholders are unlikely to be too concerned about his departure given that there have been a number of questions raised about his strategy to turn the ailing business around in recent months. The sudden nature of his departure announcement also raises the intriguing question, as to whether he was encouraged to leave. His replacement for now will be current CFO Margherita Della Valle.

Cineworld shares have moved higher after denying reports that it plans to sell off some of its business as it tries to emerge from bankruptcy proceedings. With debts over $9bn speculation is abounding as to how the business will look when any restructuring agreement is finalised. There were also unrelated reports that Vue might be interested in picking up some of Cineworld’s assets.    


US markets opened modestly lower as investors continued to parse last Friday’s payrolls report, with US 10-year yields rallying off the 3.5% area, stocks have slipped back as uncertainty grows as to what recent data is telling us about the US economy.

Friday’s stronger than expected wages numbers have thrown an unexpected curve ball into the markets thinking about the peak inflation narrative, raising the prospect that this month’s 50bps rate rise which is expected next week, could well be followed by similar hikes in the early part of next year. This uncertainty over the size of future hikes has been amplified by a strong US ISM services report for November which saw a rise to 56.5, while prices paid only slowed to 70, from 70.7.  

Boeing shares pushed up to their highest levels since April on Friday on reports that United Airlines was close to agreeing a deal for multiple 787 Dreamliner’s.

Tesla shares opened lower on conflicting reports that it plans to lower production at its Shanghai factory, with some estimates suggesting a 20% cut. This is despite the company seeing record demand in November of 100,291.   


The US has pulled back from intraday lows in the wake of higher yields and the mixed signals coming from the recent economic data. The Japanese yen is amongst the largest faller on the back of the rise in US yields.

The pound has also retreated despite hitting a new 5 month high against the US dollar, at 1.2345, after the CBI warned that inaction by the government would lead to a decade of lost growth unless the government takes action on investment tax reliefs. The recent measures to punish business for high profits is already seeing oil and gas companies rethinking their investment strategy after Total cancelled its North Sea plans, and Shell said it would be reviewing its plans.  

The euro has similarly retreated from 5-month highs in the face of the rebound in the US dollar, although it is still one of the better performers due to slightly more resilient services PMI numbers from the likes of Spain and Italy.

The Australian dollar is trading in the middle of the G7 pack ahead of tomorrow’s RBA rate decision where there is an outside possibility that the central bank might hit the pause button on its recent spate of rate hikes. The consensus remains for a 25bps hike following on from a similar rise in November, however given concerns about the housing market the RBA might adopt a more cautious approach.    


Crude oil prices have rebounded from their Friday lows, after OPEC+ decided to keep their current production levels unchanged. With China continuing to relax some of its more onerous Covid measures the tailwinds have grown for oil prices in the short term. Whether demand picks up or not is another matter given that infection rates have continued to rise, and this morning’s China Caixin services PMI for November slowed to 46.7 from 48.4 in October.

Gold prices tried to push above the $1,800 an ounce level for the third day in a row, but have again struggled to gain a foothold. We need to see a concerted close above the 200-day SMA to open up the potential for further gains, but with US 10-year yields rebounding from the 3.5% level further upside progress for gold looks limited.


Shares in Credit Suisse surged higher on Friday after the market found confidence in comments that outflows had mostly stopped. The stock closed almost 10% higher on the session, with one day volatility coming in at 118.87% against 71.74% on the month.

The signing of a marijuana research bill into law by President Biden sent licensed Cannabis growers higher on Friday, driving action in CMC’s proprietary basket of stocks from the sector. The underlying added more than 7% to trade at levels not seen since late August. One day vol on the basket came in at 119.31% against 93.68% on the month.

Those stronger than expected US payroll figures on Friday threw markets something of a curve ball and although the tech-heavy NASDAQ ended the session little closed, there was a brief but significant move lower off the back of the data. That served to shift one day vol on the index to 33.85%, up from 29.92% on the month.

Dollar/Yen was also rattled by those payroll stats, although once again the upside proved to be relatively short lived. Whilst the headline figures were strong, the data was accompanied by pockets of weakness. One day vol on USD/JPY came in at 20.11% against 14.83% on the month.

And finally, Silver posted a good end to the week, finding its way back to levels not seen since April. Dollar weakness and those non-farm payrolls are seen as being drivers here, with one day volatility of 38.44% against 34.63% on the month.


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