Europe
Traders are treading lightly as the North Korean tensions have ticked up. The rouge state has threatened to detonate a hydrogen bomb in the Pacific Ocean. To some extent, investors are used to the background noise, but every now and then, the rhetoric gets ramped up, and today is one of those days. The North Korean impact isn’t always a major sell-off, sometimes it’s a lack a bullish sentiment.
The FTSE 100 traded above the 7300 mark after sterling slipped on the back of Theresa May’s speech about her Brexit plans in Florence.
Johnson Matthey (LON:JMAT) shares are up 3.3% after the company was upgraded by two investment banks this morning. The company issued a positive statement yesterday, along with a major investment for its battery business. That prompted a double digit surge in the share price, and the broker upgrades today were the icing on the cake. The stock hit an 11 month high today, and if it clears 3568p, it may pave the way for a rally to 3799p.
The weakness in the copper and iron ore markets has driven down the value of mining stocks like, BHP Billiton (LON:BLT), Glencore (LON:GLEN), Anglo American (LON:AAL) and Antofagasta (LON:ANTO). Iron ore has fallen by 16% this month amid fears of cooling demand. China is upping its environmental policies, and this puts pressure on the steel industry, hence the fears over falling demand for the underlying minerals.
Traders will be eyeing the German elections over the weekend, it is widely expected that Angela Merkel will remain as Chancellor, but who will be her coalition partner remains to be seen.
US
The Dow Jones, S&P 500 and Nasdaq 100 are broadly unchanged as volatility drops. Traders are cautious about the tensions surrounding North Korea, and they are sceptical about holding large positions going into the weekend.
Investors are also questioning how serious the Federal Reserve are about rising interest rates in December. The US central bank are keeping the door open to the possibility of it, but seeing as the cost of the hurricanes has yet to be calculated, and not to mention the debt ceiling talks in three months could also pose a problem. Some of the money that has been ploughed into the American stock market, is borrowed money, and those investors don’t want to be stretched.
FX
The GBP/USD saw a high amount of volatility today in light of Theresa May’s speech about Brexit in Florence. The pound came under pressure when Mrs May stated the UK would be leaving the single market and customs union, but a some of the losses were reversed when the Prime Minister talked about a transitionary period – even though no details were given. Overall, sterling stood its ground, and the move could have been much worse. It is worth noting that the greenback is broadly lower so the pound has an easier time of it.
The EUR/USD was given a boost by the strong French and Germany services and manufacturing numbers this morning. The PMI reports showed an acceleration in the growth rate of the sectors, and they all topped dealers estimates. The solid economic updates from the two largest eurozone economies in the face of strong euro is encouraging to see.
Commodities
Gold is higher on the day, but the bounce back has been slipping, and the metal may turn over on itself. Gold has been in decline for the past two weeks, momentum is with the sellers. The Federal Reserve are keeping the option of an interest rate hike in December on the table ,and while traders fear they may keep their promise, the price of gold could remain under pressure.
The divergence between Brent crude oil and WTI is still in place. The former hit a seven month high today, and the latter dipped slightly on profit taking. Demand at US oil refineries isn’t back to pre-hurricane levels and stockpiles are high, and that is why demand is below that of Brent Crude.
The energy market has been broadly rising for the past few months, and the Russian energy minister, Alexander Novak, called for additional cooperation between OPEC and non-OPEC member in curbing output of oil.
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