Equities
Thinner trading volumes on Thanksgiving meant there was minimal movement across European stock markets on Thursday.
UK equities underperformed those in mainland Europe, which were slightly higher as German GDP data fell in the third quarter in line with expectations.
There are some signs that European institution are waking up to rising populism in their midst. The ECB used its Financial Stability Review to issue a warning on increasing political uncertainty. At the same time, the European parliament voted to suspend Turkey’s EU accession. Officially the reason is President Erdogan’s threat to Turkey’s democracy since the failed coup. Keeping Turkey out of the EU also serves the political purpose of narrowing the scope for populists fear-mongering the threat of immigration from a country with a majority Muslim population in upcoming elections.
The FTSE 100 continues to stutter around 6,800. UK markets appear to be getting minimal goodwill spillover from the record highs in the Dow Jones and Russell 2000 in the US. Weak corporate results weighed on UK-listed midcaps with the FTSE 250 underperforming the FTSE 100.
Poorly-received results from Severn Trent (LON:SVT) saw its shares fall by over 1%, with other utilities shares dropping in sympathy. Telecoms were the other big drag on UK equities, extending a fall yesterday after the Autumn Statement.
The acquisition of flight comparison site Sky scanner by China’s Ctrip is a great advert for UK plc. As a privately listed company with mostly privately-held competitors in the flight comparison space, the Skyscanner deal did little to boost sentiment in UK stock markets. The Skyscanner deal is another blow to Prime Minister Theresa May who has been championing the idea of intervention by the government to keep British firms from selling out to larger foreigner buyers. The weaker pound makes strong UK businesses like Skyscanner, ARM holdings and Poundland very attractive to foreign companies and investors -so the trend of UK firms getting acquired is unlikely to abate anytime soon.
US stock markets are closed for Thanksgiving and will re-open for a half-day on Black Friday.
FX
Volatility dimmed in the FX market on Thursday after going gangbusters on Wednesday when the US dollar index hit a fresh 13-year high.
The Japanese yen was amongst the day’s biggest movers, continuing its decent and taking USD/JPY up above 113 to its highest since March. The decent was triggered by weak Japanese manufacturing data but the ultimate reason is dollar strength.
Outside of G10 FX the Turkish lira fell to a new record low despite Turkey’s central bank raising interest rates to 8% after it was announced the European parliament voted to temporarily end talks to bring Turkey into the EU.
Commodities
Oil prices have swung around intraday in the last three days but closing prices have remained rooted around $49 per barrel. Monday’s surge on the back of Russian plans to freeze output and subsequent news that Iraq will participate has put an OPEC deal firmly back on the table. Still the historic rival between Saudi Arabia and Iran throws it into doubt, keeping a lid on the oil price. Open interest, which measures the total number of contracts in the oil market, is at its highest since 2007 as traders bet on either a successful or failed deal.
The price of gold has found some interim support near $1180 per oz. This is a significant price level for gold; it ended the sharp price slide in June 2013 and was only broken in October 2014. Still, while the US dollar continues its surge going into the FOMC December rate meeting, gold looks set to break $1180 per oz.
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