The beginning of the trading week has begun in rather sanguine fashion for both sterling and the FTSE 100, with both moving gradually higher in early trade. Last week saw a plethora of economic releases for the UK, which began brightly with better than expected employment figures before the sharpest drop in PMIs since early 2009 left the pound in particular on the back foot. The week ahead has little by way of UK data, with the central bank meetings from the US on Wednesday evening and Japan on Friday morning set to dominate macroeconomic announcements and drive the markets.
Stocks begin the week brightly
The FTSE 100 is trading higher by around 18 points at the time of writing, with the more volatile shares of late leading the way higher. It’s been a tumultuous time for housebuilders Taylor Wimpey (LON:TW) and Barratt Developments (LON:BDEV) since the EU referendum with both experiencing sharp selling in the aftermath. However today they are amongst the best performing stocks, which is often the case as the sharpest rallies for stocks often occur during moves lower. This has also been the case for the global miners, with BHP Billiton (LON:BLT), Anglo American (LON:AAL) and Glencore (LON:GLEN) all seeing severe declines in the past 12 months, but unlike the housebuilders these firms have benefitted - in the short-term at least - from Brexit. The decision to leave the EU has been beneficial for companies that are listed in the UK who generate the majority of their revenue in currencies other than the pound, as the rapid depreciation of sterling has given them a substantial boost in pound terms.
Gold drops on Fed expectations
The price of Gold has been moving steadily lower over the past couple of weeks, largely due to increased expectations of the US central bank continuing on their path of rate hikes. The initial panic from the EU referendum saw bullion prices soar, but the growing sense of calm that has subsequently ensued - with stock markets around the globe recovering their initial losses in impressive fashion - has seen money come out of the perceived safe haven asset. The price of US stock benchmarks such as the S&P500 have not only recovered their losses, but have since continued to rise and in the process of doing so posted all-time highs. A strong US employment report at the start of the month went a long way to dispel fears surrounding the labour market in the world’s largest economy, and has additionally supported the case for tighter monetary policy in the US in the not too distant future. The effects of all this can be seen firstly in the price of gold, and from a stock perspective in the price of gold miners on the FTSE 100, with Randgold Resources (LON:RRS) and Fresnillo (LON:FRES) the two worst performing shares so far this morning.