Investors continue to watch for developments surrounding the political situation in the Europe and more specifically in France. Whilst speculation swirls as to whether Le Pen will be able to whip up sufficient support to take the presidency, investors are starting to position themselves accordingly. Up to now, French treasury yields had been bearing the brunt of the Frexit risk, however as we move closer towards the elections we expect this political risk to show itself in the single market currency and consequently the euro to come under considerable pressure.
European Banks
With event risk in France increasing, the markets breathed a sigh of relief as SocGen (LON:0J6Y) managed to pull out some decent figures for the Q4. Net profits fell but still beat on expectations. This is some much needed good news for the banking sector across Europe, which is struggling in a low interest rate environment.
Gold shines brightly
As political uncertainty remains a key theme on both sides of the Atlantic, investors are taking a shine to gold. The precious metal continues to rise on Thursday, putting it in line for its 6th straight day of wins and to its highest level since early November. As the markets navigate through the political fog, a push towards $1300 by this safe-haven asset is a very real possibility. With elections in France and Germany, Brexit woes and an Italian banking crisis on the cards, we would be fools not to consider gold.
Crude withstands huge US inventory increases
Crude oil is showing what it’s made of; on the rise today despite 2 sets of inventory data showing a vast build in US oil inventories. An unexpected decline in gasoline stockpiles, signalling that demand for crude will rise in the coming weeks is offering support to crude and pulling it off recent lows. The rebound in crude oil translating across into the stock markets this morning, where the FTSE 350 oil & gas sector is one of the top performers (also with thanks to encouraging results from European oil major total).
Sterling steady as we continue down the path to Brexit road
Sterling is holding steady as we continue along to road to Brexit. Yesterday the House of Commons passed May’s Brexit Bill, which will now move forward to the House of Lords for their deliberation on February 20th. GBP/USD showed a modest reaction, which was actually as result of dollar dynamics rather than a sterling story.
There is no top tier UK data, instead Mark Carney will be making an appearance, at a BoE Inclusion Reception, it is unclear whether he will address monetary policy. Investors may have to wait for industrial production and manufacturing data due tomorrow for any significant movement in sterling. Should the manufacturing boon that we saw in November continue into December’s figures, we can expect sterling to push higher. Conversely, if we see a payback in December for the strong November print a weaker pound will be on the cards.