Europe
The FTSE 100 is being held back by the rally in the pound on the back of the announcement the UK government has agreed in principle to make a payment to the EU. The so-called ‘divorce bill’ is believed to be in the region of £50 million and this is seen as a boost to British political prospects. The FTSE 250, which is seen as better barometer of the British economy than FTSE 100, is higher on the day.
Homebuilders are in demand today as it appears the UK is making progress on the Brexit negotiating terms. There was a lot of political uncertainty hanging over the housing sector, and after today’s announcement, the share price of Berkeley Group (LON:BKGH), Barratt Developments (LON:BDEV) and Taylor Wimpey (LON:TW) are up on the day.
Eurozone equity indices are enjoying a positive run as the global market sentiment is back to its bullish form. The DAX, CAC 40 and IBEX 35 hit levels not seen since the first-half of this month.
Cineworld (LON:CINE) shares are down 19.5% after the company stated it plans to undergo a rights issue and borrow money in order to fund the takeover of Regal Entertainment. Cineworld is planning on paying $3.6 billion to acquire the company, which will give Cineworld exposure to the US market.
US
The Dow Jones and S&P 500 reached fresh record highs yet again as strong economic indicators from the US underline how strong the economy is. US growth in the third-quarter rose by 3.3%, a respectable revision upward from the 3% that was originally stated. The time period would have included the hurricanes struck America, so it shows how impressive the growth was.
The Nasdaq 100 is suffering as traders are concerned that tech stock won’t will not see a major benefit from the proposed tax cuts. Investors had high hopes that US tech giants would reap a major reward from President Trump’s proposed tax cuts, and now the outlook isn’t as optimistic.
Pending home sales for October jumped by 3.5%, and economist were expecting an increase of 1%. It was the largest jump in pending home sales in eight months.
Janet Yellen, the outgoing Chair of the Federal Reserve was testifying in front of the Joint Economic Committee of Congress in Washington DC today. Ms Yellen stated she was still confused as to why inflation was still so low. The head of the US central bank also stated she doesn’t want to let the economy overheat.
FX
GBP/USD hit a 2 month high today as the bullish sentiment is still surrounding sterling because of the Brexit bill news. The announcement came last night and dealers are snapping up sterling as it is a step in the right direction for the UK. The pound has been gaining ground versus the US dollar since March and it appears the positive run will continue.
EUR/USD is has been sliding since the morning as he US dollar is staging a strong come back. Even the impressive inflation report from Germany couldn’t push the single currency higher. Inflation in Germany ticked up to 1.8%,from 1.6% in October, and the consensus was for a reading of 1.7%. The jump in German CPI bodes well for the euro as the European Central Bank (ECB) have been previously worried about the relatively weak inflation in the eurozone.
Commodities
Gold was pushed lower by the stronger than expected US third-quarter growth report. The metal was driven into the red as the impressive GDP figures, but gold still hasn’t moved that much when you consider how good the figures were. The metal has been experiencing low volatility for the past month, and even when the market does move outside its average daily range its moves are fairly limited.
WTI and Brent Crude jumped after the energy information administration released the latest US oil stockpile figures which showed a greater than expected drop. Oil inventories dropped by 3.42 million barrels, while dealers were anticipating a drop of only 3 million barrels.
OPEC will announce their decision tomorrow in relation the co-ordinated production cut, and there is a lot of talk it will be extended until the end of 2018, but whether Russia will follow suit remains to be seen.
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