Equities
A record high in the Nasdaq and a pullback in bond yields helped to unwind some of the early losses in stock markets, though most European equity benchmarks finished the week on a soft note.
Election fever has caught the investing world. With populism running amuck and Italy’s referendum up next, Italian shares have been the notable losers this week.
The record high in the tech-heavy Nasdaq helped put the UK’s biggest technology firms near the top of the FTSE 100. A difficult week in metals markets meant the basic resource sector was the biggest drag on the UK equity benchmark.
Gold and mining company shares including Randgold (LON:RRS) and Antofagasta (LON:ANTO) are feeling the brunt of falling commodity prices. Rio Tinto (LON:RIO) is especially in the spotlight on reports it is in discussions with Australian police over possible corruption claims. Emails detailing payments made to a banker linked to Guinea’s president look like the kind of smoking gun that could lead to a formal investigation.
Consumer-based sectors were amongst the top risers on Friday. The surprisingly positive trend in retail sales and the upcoming Black Friday holiday are creating some renewed interest in consumer stocks.
Telecoms giants BT (LON:BT) and Vodafone (LON:VOD) fell following the reports of a hack at mobile operator Three. Three has admitted that hackers accessed its customer upgrade database, potentially putting 6 million customer’s data at risk. The regularity at which these big firms are being hacked is getting alarming. It’s becoming one of the biggest unquantifiable risks that investors now need to consider.
US stocks were mixed early on Friday. The Nasdaq reached a fresh record high whilst the Dow Jones edged lower. All the FANG (NASDAQ:FANG) stocks turning back higher has helped the tech-heavy Nasdaq breach the record high reached last month. Shares of Tesla (NASDAQ:TSLA) were a drag on the Nasdaq after shareholders approved its Solar City deal.
FX
The US dollar gained a little more ground in the aftermath of chair Yellen’s testimony. Fellow FOMC voter James Bullard said the US presidential election has not affected the Fed’s outlook for next year as policy changes would not take effect until 2018-19.
With the dollar index breaking above 101 to a fresh 14 year high, you’d think Fed chair Janet Yellen was fiercely hawkish in her testimony to lawmakers. In fact, Ms Yellen was characteristically cautious, citing further room to tighten in the labour market and refused to take any future fiscal stimulus as a given. Still, it’s a near-certainty that the Federal Reserve will raise interest rates in December. Bond yields are rising with inflation expectations regardless of what Fed officials say.
The British pound picked up more lost ground against the dollar and the euro. The surge in retail sales symbolise how overplayed the short-term economic risks of Brexit were and upcoming elections mean geopolitical tensions are shifting from the British Isles towards the continent.
The euro fell against the pound and the dollar after ECB President Mario Draghi implied stimulus is still needed. EUR/USD has now had its longest losing streak on record, taking it below 1.06 for the first time since December.
Commodities
The meeting of OPEC and Russian oil minister in Doha meant headline watching was the name of the game in oil markets on Friday. The tone of remarks was mostly positive which helped the price of oil inch higher. Russia’s Novak said the talks were ‘constructive.’ A renewed faith in oil ministers to put national interests aside for the good of the industry has seen oil prices gain ground this week following three weeks of declines.
Decade highs reached in the US dollar meant the price of gold fell to fresh five-month lows and iron ore had its worst weekly loss since May. There was some signs of life with copper pulling off the lows in afternoon trading. There’s been no clear shift in supply/demand dynamics in metals prices; it’s purely a strong dollar phenomenon.
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