Rising bond yields and slumping metals prices created a risk-off mood amongst investors on Friday. Within the first hour of trading, the FTSE 100 unwound all of yesterday’s gains to trade back below 6750.
Gold and mining company shares including Randgold (LON:RRS) and Antofagasta (LON:ANTO) are feeling the brunt of falling commodity prices. Gold is nearing its weakest since February and iron ore is set for its worst weekly loss since May. There’s been no clear shift in supply/demand dynamics in metals prices; it’s purely a strong dollar phenomenon.
With the dollar index breaking above 101 to a fresh 14 year high, you’d think Fed chair Janet Yellen was fiercely hawkish in her testimony to lawmakers. In fact, Ms Yellen was characteristically cautious, citing further room to tighten in the labour market and refused to take any future fiscal stimulus as a given. Still, it’s a near-certainty that the Federal Reserve will raise interest rates in December. Bond yields are rising with inflation expectations regardless of what Fed officials say.
Telecoms giants BT and Vodafone (LON:VOD) fell following the reports of a hack at mobile operator Three. Three has admitted that hackers accessed its customer upgrade database, potentially putting 6 million customer’s data at risk. The regularity at which big firms are being targeted by hackers is getting alarming. Hacking is becoming one of the biggest unquantifiable risks that shareholders now need to consider for their investments. Companies with large customers databases without adequate security in place deserve a lower valuation to factor in the greater risk of being hacked.
Consumer-based sectors were amongst the top risers on Friday. The surprisingly positive trend in retail sales and the upcoming Black Friday holiday are creating some renewed interest.
The euro fell against the pound and the dollar after ECB President Mario Draghi implied stimulus is still needed. EUR/USD has now had its longest losing streak on record, taking it below 1.06 for the first time since December.
US stocks look set for a lower start in a pullback from the S&P 500 testing its record highs. Shares of Tesla will be in focus after investors approved its Solar City deal.
USA pre-opening levels
S&P 500: 6 points lower at 2,181
Dow Jones: 32 points lower at 18,871
Nasdaq 100: 5 points lower at 4,821
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