Equities
Hillary Clinton getting the all clear from the FBI over a new set of emails saw markets convulse into nervous relief. Stocks and North American currencies were in demand and havens like gold and bonds were dumped.
FBI Director James Comey announcing no criminal wrongdoing in a latest batch of Hillary Clinton emails gives her the unexpected opportunity for a last hurrah before polling starts on Tuesday. The perception in markets is that this should edge Hillary Clinton over the finishing line.
The FTSE 100 participated in the relief rally, leaping over 1.5% to touch 6,800, helped by a drop in the British pound as the US dollar rose. Well-received earnings from HSBC and a pickup in bond yields helped send financial shares higher. Another daily surge in the price of industrial metals including copper meant mining companies were amongst the top risers.
HSBC shares rose over 4% following the publication of third quarter results. Profits crashed 86% year-over-year because of losses in selling its Brazil business but a 7% rise in adjusted profits beat expectations. The rise in underlying profits in combination with a solid core tier one capital ratio suggest the restructuring of HSBC is coming together in a measured way, and improves the outlook for the dividend.
Tesco (LON:TSCO) shares dipped as much as 3% but pulled well off the lows by mid-morning after many Tesco Bank current account customers were hit by fraud, forcing the suspension of online transactions. No other bank shares were directly involved because Tesco runs its bank in-house rather than white-labelling. Of the 20,000 accounts reportedly affected, Tesco appear to have made good most of the money lost, but their trust will be harder to win back.
Tesco is one of a handful of challenger banks looking to take on customer lethargy at the Big Four banks. Shares of other challenger banks including Aldermore (LON:ALD) and OneSavings gained 2% on hopes of picking up some of the lost business from Tesco Bank.
The perception of insecurity at a challenger bank will not help the cause of current account switching from the Big Four. The inability of many customers who lost money to reach online or telephone customer services after the fraud may cause some second-guessing over the switch to 100% digital banking. Standing in a queue outside a branch might be a good option to have.
US markets opened higher hopes of a Hillary Clinton Presidential victory and a continuation of the status quo in the USA. After dipping below 18,000 last week the Dow Jones easily topped 18,100 in early trading on Monday.
FX
An early jump in the US dollar dominated FX markets on Monday with most G10 currencies losing approximately 1% against the greenback. The FBI concluding its investigation into Hillary Clinton’s emails is positive for her campaign for the Presidency. The market has already shown its hand, a Hillary Clinton is positive for the North American currencies. The dependency of the Canadian and Mexican economies on the US means its the Mexican peso then Canadian dollar then US dollar that are the biggest beneficiaries.
Commodities
The price of gold tanked on Monday with investors repricing the need for a safe haven after the FBI ended its probe into Hillary Clinton’s emails. Having topped $1300 per oz on Friday, gold has fallen $20 with more declines on the cards if polls continue to show Hillary Clinton consolidating her lead.
Oil prices gave up early gains as sceptical investors took advantage of the bounce to sell more contracts on the belief OPEC will be unable to agree an output cut. Oil had gained early on concerns of supply disruption from an earthquake centred in Cushing Oklahoma.
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