Europe
Today was a busy day for central banks, but by and large the stock market reaction was muted.
The Bank of England (BoE) kept interest rates on hold, and the stimulus package remained the same, both meeting market expectations. The European Central Bank (ECB) failed to surprise the market also by keeping their interest rates on hold also. The ECB President, Mario Draghi, left the door open to additional or extended monetary easing, should it be required.
Lonmin (LON:LMI) shares soared after the company agreed to be bought out by Sibenye-Stillwater for £285 million. The mining company has been struggling for a number of years, and it needed to raise funds from shareholders on several occasions in recent years. Last month the firm delayed announcing its figures, and that spooked the market.
Capita Group shares slumped today after the company described the market as ‘subdued’. Last year Capita Group issued a number of profit warnings and even though the business has stabilised, it appears they are still finding it tough. Since September, the company has revised down its amount of work in the pipeline by 19%. The share price fell to a 12 year low today, which show bearish the sentiment is surrounding the stock.
US
The Dow Jones, S&P 500 and NASDAQ 100 are all in positive territory as traders remain optimistic about the possibility of the US government introducing tax cuts. For many months now investors have been snapping up US stocks in anticipation of the pro-business reforms being introduced, and the wave of buying momentum is still going strong.
It is not just optimism that is running high, but the actual economy is still showing signs of continued improvement.
US retail sales in November on a month-on-month basis rose by 0.8%, and the October reading was revised up from 0.2% to 0.5%.The core retail sales figure was impressive too, and it jumped by 1%, which easily exceeded the consensus of 0.6%. Robust sales in November could set the pace for the busy Christmas period.
There was further proof the US economy is improving as the jobless claims rate fell to 225,000 from 236,000. The fits in with the solid non-farm payrolls report last week.
FX
GBP/USD was given a boost by strong retail sales from the in the in morning. Last month, British retail sales rose by 1.6% on a year-on-year basis, while traders were only anticipating a rise of 0.3%. The sizeable beat on expectations is encouraging to see, as it shows consumer spending is far more aggressive than initially thought. The bullish move in the pound started to weaken as the trading session went on, and the impressive retail sales from the US pushed sterling into the red. Sterling has been moving higher versus the US dollar since March and the positive trend is still in place.
EUR/USD is under pressure as the ECB Chief Mario Draghi left the option on the table for extra monetary easing, and the rally in the US dollar on the back of the impressive sales figures put additional pressure on the currency pair. Mr Daghi is known for talking down the euro as the weakened currency has assisted growth in the eurozone
Commodities
Gold has pulled back a small bit from the rally yesterday on the back of the Federal Reserve interest rate hike. The metal pushed has given back some of the gains in notched up yesterday after the US central bank delivered the much anticipated interest rate hike, and kept the outlook for 2018 unchanged. The consensus is for three interest rate hikes in 2018, for now, but that may change as the make-up of the Fed will change in the coming months.
WTI and Brent Crude oil have recouped some of the losses they suffered yesterday, when it was reported that US gasoline inventories jumped at a much faster rate than expected. The energy market is still strong as two weeks ago OPEC and Russia agreed to extend the oil production cut until the end of 2018.
The oil producing nations run the risk of reactivating the US shale industry which could be enticed to ramp up production on the back of higher oil prices.
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