Stock markets are largely lower as political uncertainty persists, and the plunge in the oil price has hurt oil stocks. 

Europe

Dealers are still waiting for the Italian and UK situation with respect to the EU to play out. The EU summit over the weekend could shed new light on Brexit. In London, oil stocks like BP, Royal Dutch Shell and Tullow Oil are firmly in the red on account of the sharp sell-off in the underlying oil market.

Flybe shares have soared after it was reported that Virgin Atlantic are considering acquiring the struggling airline. The two companies already operate a code-share as Flybe are regional focused, while Virgin are geared towards transatlantic flights, so a takeover could be used for cross-selling. Last week Flybe effectively put itself up for sale, and it seems that Virgin are keen to look into the possibility of a takeover. Given that the industry has been be struggling recently, the prospect of consolidation isn’t a surprise. Flybe’s shares have soared this morning on the report.     

Interserve shares are lower after the company stated its expected year-end net debt to be higher than expected, but it plans to trim its debt position. Earlier this year the group disposed of a development in Edinburgh to help keep its debt under control. The group continued to trade in line with management’s forecasts for the first nine months of the year. The outlook isn’t overly optimistic as the order book for international business continues to be lower than expected. All eyes are on the company in the wake of Carillion’s demise, and they have a difficult job of lowering debt in a mediocre economic environment. The stock has been in decline since 2014, and if the negative move continues it might target 27p.

Fuller, Smith & Turner announced a 12% decline in first-half profit, and revenue fell by 6%. The group cited increased investment spending for the double digit drop in earnings. The group confirmed that like-for-like sales jumped by 4.1%, and this is encouraging to see as some players in the pub sector have complained about a tough climate.

US

The major indices are in the red as traders remain fearful of the tech sector, concerns about trade persist, and the major decline in the oil market is eroding sentiment too. Some dealers are not working today as the stock markets will close at 6pm (UK time), as yesterday was Thanksgiving. Volatility is low, but the same worries that traders had all week still persist. 

The services PMI report came in at 54.4 in November, meeting forecasts, while manufacturing PMI report was 55.4, and the consensus estimate was 55.7. The readings were respectable and it shows the US economy is ticking along. There is still a lot of chatter in the market that the Federal Reserve will hike interest rates next month.

FX

The US dollar index is higher today, largely because of the weakness in other currencies. Traders are still divided over how many rate hikes the Federal Reserve will deliver in 2019.

EUR/USD is lower on the session after Germany released disappointing manufacturing and services data. Both economic reports from the largest economy in Europe showed a slower rate growth in November, and the readings undershot forecasts. The French manufacturing report was underwhelming too.

USD/CAD is higher on the session despite impressive economic updates from Canada. Canadian inflation ticked up to 2.4% in October, from 2.2% in September, and retail sales jumped by 0.2% in September, topping the forecast of 0.1%. These figures point to healthy demand. The severe sell-off in the market weighed on the Canadian dollar.

GBP/USD has been hit by the firmer US dollar, and the continued uncertainty surrounding Brexit is playing a role too. Theresa May has agreed a deal, but selling to her own party is likely to a struggle.

Commodities

Gold is in the red on account of the move higher in the US dollar. The commodity continues to be driven around by the greenback. The gold market has seen low volatility in recent weeks, and it doesn’t bode well for the metal, that it could muster a rally when there has been major sell-offs in world stock markets.

Oil has gone from bad to worse as the market endured further losses. Yesterday, we heard from Saudi Arabia, who suggested oil production reached another record high. US oil stockpiles have been rising for the past nine weeks, and that is playing into the mix too. Traders are starting to wonder if the slump in the oil market also reflects weak future demand, and that is weighing on the price also.  

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