European markets have got off to a subdued start with basic resource stocks once again leading the way, on the back of another good day for iron ore prices in Asia. The FTSE100 is once again the main beneficiary of this resilience in commodity prices, while a firmer US dollar is still bouncing back after a Monday pullback that saw a its first daily decline in nine days.
The latest France and Germany manufacturing and services PMI numbers for November showed that both appeared to be showing some decent economic activity though there does appear to be some evidence of a softening of activity in the manufacturing sector.
On the plus side mining stocks are leading the way with Fresnillo (LON:FRES), Glencore (LON:GLEN) and BHP Billiton (LON:BLT) leading the way. Also doing well despite seeing a fall in profits is United Utilities (LON:UU) of £16m though was largely down to an increase in financing charges.
On the downside Royal Bank of Scotland (LON:RBS) is underperforming as banking stocks in general come under pressure across Europe, with Italian banks once again being the main pressure point.
The US dollar continues to gain ground, with the pound the biggest faller ahead of this afternoon’s Autumn Statement, when it is expected that the UK Chancellor Philip Hammond will outline the outlook for the UK economy post this summer’s Brexit vote.
Ultimately, the need to do anything significant is much less urgent now given that the UK economy is currently in a much better shape than most had predicted in the aftermath of the June vote.
Currently the economy looks set to show 0.5% GDP growth for Q3, which means we’re not likely to see anything in the way of surprises, and probably will only see a little tinkering around the edges.
Anything more radical is likely to be reserved for the March 2017 budget when we’ll get a better idea of how the economy looks as well as the timing of article 50.
US markets which hit new records last night look set to open slightly higher ahead of today’s release of the latest FOMC minutes, where we’ll get an idea of how various Fed members lined up with respect to a December rate rise.
These minutes aren’t likely to be that significant given that a number of Fed policymakers including St. Louis Fed President James Bullard and Fed vice chair Stanley Fischer have already indicated that a rate rise in December is quite likely now, given that markets have already assimilated the effects of Donald Trump’s surprise win, and the possible policy effects. Since the election the markets assessment of the probability of a December rate rise has gone from 74% to now being a 100% probability, which of course now begs the question as to how quickly the next rate rise will follow.
On the earnings front, Deere & Co. (NYSE:DE) are expected to announce their latest Q4 numbers of $0.386c a share.
The Dow Jones is expected to open 16 points higher at 19,040
The S&P500 is expected to open 1 point higher at 2,204
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