Europe
After having paused on Monday over Crude Oil price uncertainty; shares in Europe resumed their steady creep higher on Tuesday ahead of the central bank meeting later in the week that has investors filled with expectation for more monetary stimulus.
Merger targets, oil companies and supermarkets topped UK stock markets on Tuesday after Aviva Plc (LONDON:AV) agreed to buy Friends Life Group Ltd (LONDON:FLG), oil prices stabilised from recent dramatic falls and supermarkets pulled back from several straight days of losses.
Oil prices did drop again today but so long as they don’t take out the recent multi-year lows, that should offer some support to the stronger oil stocks as investors should start to become more discerning over which oil companies can withstand the lower prices.
Aviva have agreed to buy Friend’s life for £5.6bn in shares to make Britain’s largest insurer. The two businesses are thought to be complimentary with Friend’s life more geared towards large corporate pensions while Aviva is more focused on SME’s. The newly created insurer will have large market share but can’t address a pensions market that maybe in decline thanks to new government rules freeing up pensioners from forced annuities.
Royal Mail (LONDON:RMG) shares were lower after regulator Ofcom said it won’t impose regulations on competitors. Royal Mail CEO Moya Green had complained that Royal Mail’s universal service puts it at a disadvantage against competitors who cherry pick the prime delivery areas to operate. Ofcom seem to believe that Royal Mail’s dominant position in the delivery network should more than offset any disadvantage from universal service.
US
It was the turn of companies benefiting from oil price declines to dominate US markets on Tuesday as automakers reported record sales in November as a stronger economy and lower interest rates encourages drivers to buy trucks and SUV’s
Fiat Chrysler Automobiles NV (NYSE:FCAU) was the stand-out performer seeing sales jump by 20% on demand for Jeep SUVs and Ram pickup trucks, GM also saw rising sales while Ford saw a slight decline.
Shares in Apple Inc (NASDAQ:AAPL) were lower as the company faces another trial on Tuesday over digital music claims from customers over monopolising markets with iTunes and its iPod devices which could potentially cost the company $1bn.
Apple shares sunk heavily on Monday under a culmination of factors driven by poor Black Friday sales within the retail sector which prompted a broker downgrade and possibly triggered some algorithm selling with the stock very overbought up 25% off the October lows.
Shares in Alibaba Group Holdings Ltd (NYSE:BABA) extended further beyond $100 on the prospect that the company could benefit from a tax loophole for online sellers inside the US that puts it at an advantage over local retailers whose customers will be paying taxes.
FX
The US Dollar returned to form on Tuesday with oil-currency the Norwegian Krone seeing the biggest losses while the Australian dollar was down the least against the greenback as the RBA remained on hold in its latest meeting.
UK construction PMI slightly missed estimates at 59.4 prompting GBP/USD to drop back below 1.57 after Monday’s huge rally off the lows; the pair appears well supported at 1.56.
USD/JPY has reaffirmed Moody’s ratings downgrade of Japan buy surpassing the 119 handle and looks set to test the 120 round number.
PPI data added to the lowflation story in Europe and fuelled already heightened expectations of more easing from the ECB on Thursday.
Commodities
Most commodities turned lower gain on Tuesday as the dollar strengthened, the main exception being Aluminium and Copper.
Fundamentally the case remains for lower oil and Gold prices so investors are still taking the bounce yesterday as a chance to sell. The move higher yesterday has definitely added to upside potential, the extent of the reversal higher on Monday may mean short-sellers don’t have the confidence to hold on for new lows.
Gold corrected back to $1200, the price has been the centre of gravity for months now. Silver was breaking even after a monumental reversal higher on Monday.
Oil prices turned down again on Tuesday but did not undo Monday’s gains after rebounding higher off $67 per barrel on the WTI US contract.
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