UK & Europe
European shares dropped slightly on Friday. The FTSE 100 and German DAX both lost less than half a percent and traded within the previous day’s price range.
A weak Asian session and a drop in commodity prices led to a lower start in Europe but shares came off their lows and mostly traded sideways in characteristically low volumes surrounding the Thanksgiving holiday in the US.
Regulators in China stepped up probes into short-sellers to include some of the country’s biggest brokerage houses. The reason for the probes is likely to help stabilise the market by clamping down on leveraged trading and short-selling. The short-term reaction however has been destabilisation as investors run scared.
The mini-rout in China meant it was the more Asia / emerging market-sensitive names propping up the FTSE 100. Anglo American (L:AAL) fell over 7% while gold-miners Fresnillo (L:FRES) and Randgold (L:RRS) dropped heavily tracking the $15 drop in the price of gold. In the financial sector, Aberdeen Asset Management, HSBC and Standard Chartered (L:STAN) were all top fallers.
Shares of Standard Chartered PLC (L:STAN) are hovering near six-year lows ahead of the results of Bank of England stress tests next Tuesday. The focus of the tests is dealing with troubles in emerging markets, something StanChart is especially exposed to.
It’s perhaps appropriate that on Black Friday electrical goods retailer Dixons Carphone (L:DC) was top-riser on the FTSE 100. Huge crowds outside shops at early hours followed by fights over flat screen TVs was back to being a purely American phenomenon this year as the British stayed at home and ordered their Black Friday deals online.
The switch to Black Friday as an online event should favour those with the biggest online presence like Amazon (O:AMZN) and could end up hurting companies with the extra costs associated with a large store footprint like Dixons Carphone. The only redemption for traditional retailers will be those that have a compelling online offering can offer ‘click and collect’ so people can collect their items in stores, but avoid having to scrum down on Black Friday to do so.
US
US stocks opened lower on Friday, tracking the minor losses seen in Europe. Thin volumes can be expected to keep activity limited as many market participants take the day off for an extended Thanksgiving holiday weekend.
FX
Having lost ground on Thursday, the dollar strengthened on Friday as it trades sideways ahead of a number of key events, not least non-farm payrolls next week.
The Swiss franc made a fresh five year low versus the US Dollar. There is speculation that additional stimulus from the ECB next week may force the Swiss National Bank to intervene to weaken the franc. Today, USD/CHF surpassed 1.0240 for the first time since the week the SNB de-pegged the franc from the euro.
EURCHF sits at around 1.09 and has done since August. The risk for the SNB is that further interest rate cuts and more asset purchases from the ECB could drive EUR/CHF back towards parity, harming Switzerland’s exporters.
The British pound fell against the euro and dollar after the second estimate of UK GDP for the third quarter fell in line with previous estimates and consumer confidence fell to the lowest in six months. UK Q3 GDP grew by 0.5% QoQ and 2.3% YoY with foreign trade the biggest drag.
Commodities
The uncertainty in China following another weekly rise in US inventories has led to a decisive fall in Brent crude oil back below $45 per dollar. Rising geopolitical tensions between Russia and Turkey helped fuel short-covering for three days but it has proven short-lived. It would take a brave soul to stay long ahead of an OPEC meeting in which its likely members will decide to maintain current oil output quotas.
Investors steered away from precious metals as a safe-haven, despite the likelihood of further fiat currency debasement at next week’s policy meeting, instead choosing government bonds where the German 2 year is now yielding a bargain -0.4%.
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