Europe
It’s been a more positive session for Europe’s markets today with banks in particular getting a bit of a lift after Italy’s largest bank Unicredit (MI:CRDI) announced another capital raising its fourth one since 2008, this time of €12bn in its latest attempt to draw a line under its woes of the last 8 years.
This has helped buoy European financials, with the FTSEMib outperforming, however while it is welcome that an Italian bank CEO is finally grasping the nettle of the problems facing his particular bank, this isn’t the first time that Unicredit has tapped up its shareholders for extra cash in the last 8 years. Investors will be hoping that this time will be fourth time lucky, given that the shares are down over 55% over the last twelve months, with any decision likely to be made in the New Year.
Much will depend on the outcome of any rescue package for Monte dei Paschi in the coming days and weeks, with some reports that EU authorities may well look past a limited state sponsored rescue package, as a fiscal one-off.
Despite some better than expected Chinese economic data overnight the basic resource sector has underperformed for the second day in succession.
The latest Kantar Worldpanel grocery market data was welcome news for Tesco (LON:TSCO) this morning as it showed that the company continued to improve its market share at the expense of its main rivals Sainsbury and Morrisons, however the share price was nowhere near as impressed, sliding towards the bottom of the FTSE100.
ITV (LON:ITV) is also higher on the back of speculation that it may become the subject of a bid in the wake of 21st Century Fox’s bid for Sky.
US
US markets have continued their recent progress to record more new record highs as the latest and last Fed meeting of 2016 gets underway in Washington today, with investors seemingly intent on pushing the Dow closer to the psychologically important 20,000 level before year end.
Financial markets remain fairly sanguine about the outcome of tomorrow’s rate decision with a 0.25% rise in rates pretty much already priced in.
Stocks in focus include Boeing (NYSE:BA), which hit new all-time highs today despite announcing a cut to its production of its 777 aircraft from seven to five per month, from August next year. The company offset that by announcing a hike in its dividend as well as announcing a stock buyback.
Exxon Mobil (NYSE:XOM) will also have to start looking for a new CEO after it was announced that Rex Tillerson would be taking up the role of Secretary of State for the new Trump administration.
FX
The pound continues to push higher as it gets a lift from today’s CPI inflation numbers, coming in as they have at the highest level in over 2 years at 1.2%, while another rise in import prices to their highest levels since 2011, has raised the prospect that we could see these numbers push even higher. This slow rise in inflation expectations is certainly helping feed the narrative that the Bank of England will struggle to ease policy further and raised the prospect that the next move in rates could well be up, and not down.
The US dollar has continued to come under pressure, slipping back a touch, as the last Fed meeting of 2016 gets under way before concluding tomorrow, with an expected 25 basis points rate rise. There appears to be some twitchiness setting in that while we will see a rise in rates, that the Fed may well issue a dovish message in order to take some of the steam of this current bout of US dollar strength.
Commodities
This morning’s report from the IEA in the wake of the recent deal between OPEC and non-OPEC members has suggested that we could well see the current supply/demand surplus in crude oil inventory turn into a deficit in the first half of next year.
The report also suggested that rising demand could well help in this regard, particularly if oil producers are able to make their recent agreement stick. Time will tell but for now markets appear to be giving producers the benefit of the doubt, pushing Brent prices back up towards yesterday’s highs near $57 a barrel, however the lack of follow through would appear to suggest that any further gains are likely to be hard won.
Gold prices have continued to remain under pressure ahead of tomorrow’s US Fed rate decision, touching their lowest levels since February yesterday on the prospect of further interest rate rises as we head into 2017.
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