UK & Europe
In an about-turn from market action yesterday, Spain’s IBEX was the best performer amongst continental European equity indices. Spanish PM Rajoy has reached out to rivals to try and form a government with the opposition socialists agreeing he has ‘a responsibility’ to form a cabinet despite not winning a majority in the national election.
With little else in the way of stimulus, European shares tracked the price of oil, giving up early gains then regaining them as the price of Brent crude moved in and out of negative territory. The euro rose to just short of 1.10 to the US dollar, threatening Europe’s exporter advantage from a weaker exchange rate.
Volumes are thinning out in the shortened holiday-week so choppy price moves are common-place as markets over-react then quickly retrace.
A dead-cat bounce in the mining sector was enough to keep the FTSE 100 in the green on Tuesday after China’s CSI 300 benchmark index rose to a four month high and metal prices held off multi-year lows. Improved sentiment towards China helped make Asian-focused Aberdeen Asset Management PLC (L:ADN) and Standard Chartered (L:STAN) shares top risers on the UK benchmark outside of the commodities space.
US
US stocks opened flat on Tuesday after US third quarter GDP growth fell but less than expected in its 2nd revision. Nike (N:NKE) was top riser on the Dow jones ahead of its earnings after the bell. Supplier profit-warnings were still a weight on Apple shares (O:AAPL) which look set to finish 2015 with a loss.
FX
The US Dollar was mostly weaker on Tuesday as US third quarter growth was revised to down 2.0% from 2.1% albeit better than the 1.9% expected and US existing home sales crashed -10.5% in November.
The British pound sank after public sector borrowing grew more than expected in November. The US rate-rise, dovish commentary from the Bank of England and slowing wage growth have all contributed to the pound’s downfall. GBP/USD fell to a fresh 8-month low below 1.4850.
The euro rose after data for Germany showed an increase in consumer confidence in December. EUR/USD has held the 1.08 figure and looks set for a re-test of 1.10.
Commodities
The oil price is seeing some short-covering after Brent crude hit a fresh eleven year low on Monday and before API oil inventories are reported later. Sentiment towards oil has gotten overly bearish in the past week on essentially no new information so there is some scope for a rebound, especially if inventories see a drawdown.
Metal prices were mixed on Tuesday with Gold and copper both lower for the first day in three. Commodities had been boosted by China’s new year plans for fiscal stimulus.
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