The rally seen in global stock markets Since Trump’s victory in the US elections shows little sign of slowing up with the FTSE 100 having traded back above the 7000 level this morning. The pound is little changed on the day and has experienced a fairly quiet week, seeing notable gains against the Japanese Yen but falling lower against the US dollar.
Santa rally to push UK stocks to record highs?
With the FTSE 100 now trading only a little more than 1 percent off its all-time high, bulls will be hoping to keep the recent rally going into the year end. A seasonality effect called the Santa rally shows that stocks have historically often risen during the period between Christmas and New Year’s Eve - and not for the month of December as a whole as many often erroneously point out - and given the recent momentum there’s a strong case to be made for record highs to be seen before 2016 is out. The year has presented several possible reasons for the current bull market to end, but with only two weeks left stocks continue to rally and having dodged numerous bullets - with the most recent being the seemingly negative outcome of the Italian referendum - there is little to suggest we’ll see a correction anytime soon.
Old Mutual leads the gainers
The best performing stock on the FTSE 100 this morning is Old Mutual, which has risen by a little over 2%. After fairly steep declines seen in the middle of the week, the bank has recouped the losses and is looking to end Friday near its recent highs. Shares in Standard Chartered (LON:STAN) are also enjoying a day in the green, whilst a move off the lows in the price of Gold bullion has provided a bounce for Randgold Resources (LON:RRS). Overall the FTSE 100 is marginally higher by 3 points at the time of writing, with Dixons Carphone (LON:DC) countering some of the risers by continuing to fall after releasing a disappointing outlook in the retailer’s latest earnings earlier this week.
Light economic calendar into year end
This week has contained several major events that have been driving markets with the first coming before the open after a deal amongst non-OPEC producers to join the members with the organisation in cutting production saw the oil price rise to its highest level of the year. The 25 basis point increase in the Fed Funds Rate announced by the FOMC on Wednesday has added more fuel to the US dollar’s recent ascent, whilst weighing on bonds and many commodities. The Bank of England meeting was a bit of a non-event yesterday and looking forward to next week there’s not much by the way of scheduled releases that have the potential to alter the current trends in many financial markets. Having said that, there is the potential for year-end flows in the coming weeks as money managers seek to mark up their book before the 30th December and this could cause some unexpected moves. It’s also worth bearing in mind that given the recent strong moves there could be some profit taking around the corner, however until there are clear reversal signals for stocks, oil, the US dollar or Treasury yields the trend remains very much in an upwards trajectory.