Brexit problems weigh on Sterling – Binary Options Daily Review

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Markets Report

Global Markets

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Tuesday 5th December 2017
Prepared by Barry Jenkins, MarketsWorld Binary Options Analyst

 
Market Index Closing Level Move on day Intraday Market Range
CAC 5,389.29 + 72.40 5,350.59 – 5,400.10
DAX 13,058.55 + 197.06 12,974.30 – 13,117.80
Dow Jones 24,290.05 + 58.46 24,288.19 – 24,534.04
FTSE 7,338.97 + 38.48 7,300.49 – 7,369.65
IBEX 10,208.60 + 123.60 10,127.60 – 10,248.40

Closing Markets Summary

Dow Jones

Stocks in the U.S. closed mixed on Monday with the Dow Jones closing a new record high as investors cheered the weekend passage of the Senate version of a sweeping overhaul of the U.S. tax code. However, the S&P 500 and the Nasdaq finished lower as large-capitalization technology names took came under pressure. Progress on the Republican tax plan was in the spotlight for Monday, while investors continued to watch for news of the special counsel’s probe of U.S. President Donald Trump’s election campaign. Early Saturday, the Senate passed the Republican-sponsored tax reform proposal almost entirely along party lines, which being viewed as a key victory for U.S. President Donald Trump. J.P. Morgan forecast that the S&P 500 would hit 2,800 by early 2018 a level representing upside of 6% on tax reform, adding that it had been about 50% priced into shares. Last week, the Wells Fargo Investment Institute raised its target for the benchmark index, citing optimism about taxes. Economic data showed that U.S. factory orders fell 0.1% in October largely because of fewer bookings for passenger planes, cars and trucks, according to the government. Companies that featured included financial stocks which hit a 10-year high earlier in the session and were among the biggest winners, the sector saw its fifth straight daily increase. Among the notable gainers, Bank of America Corp. rose 3.4% while JPMorgan Chase & Co. was up 2.1%. Notable tech losers included Apple Inc. which dropped 0.7%, Facebook Inc. fell 2.1%, Microsoft Corp. slid 3.8% and Alphabet Inc., the parent company of Google fell 1.3%. Other major internet names were also lower, including Amazon.com which fell 2.4%, and Netflix which fell 1.5%. The Dow Jones closed up 58.46 points at 24,290.05, closing well off its intraday high. The S&P 500 which had traded higher for most of the session, lost grip on positive territory late in the session, ending down 2.78 points at 2,639.44. The Nasdaq Composite closed down 72.22 points at 6,775.37, with losses deepening near the close.

Europe

European equity markets closed solidly higher on Monday, boosted by US tax reform progress that boosted the dollar’s value and after news broke of a possible breakthrough in Brexit talks which in the end failed to materialise. Exporters were firmer as the euro dropped 0.38% against the dollar to 1.1846, continuing a retreat from its recent two- month high, and down 0.3% versus the pound to 0.8803. Weakness against Sterling came despite not entirely unexpected news that Brexit talks had hit a snag in the form of the Irish border issue. The US Senate’s 51-49 vote on Saturday paving the way for the first major overhaul of the US tax system since the Reagan administration was in focus. Economic data in Europe showed that Greece’s gross domestic product expanded at a 0.3% quarter-on-quarter pace over the three months to September, below the 0.4% that had been forecast amid upwards revisions to estimates for prior quarters. Following revisions, Greek authorities pegged second quarter GDP growth at 0.8%, versus a previous estimate of 0.5%. Eurostat reported a dip in the year-on-year rate of euro area factory gate inflation for October from 2.8% to 2.5%, forecasts were for 2.6%. Companies that featured included Fressenius, Commerzbank, Deutsche Post, ThyssenKrupp and BMW which all benefited from the weakness in the euro. Commerzbank was higher despite its London subsidiary getting a telling off by the UK financial regulator for not vetting its customers thoroughly enough. German paper Handelsblatt reported that Commerzbank had stopped conducting further business with clients whose vetting had been criticized by after the Financial Conduct Authority said its financial crime controls were insufficient. Dialog Semiconductor was lower after the German-listed, UK-based chip maker said it recognised that Apple, its largest client by far, could potentially design its own power management integrated circuits “in the next few years”. Airbus’s head of jet manufacturing, Fabrice Bregier, told Les Echos the manufacturer was still expecting to deliver over 700 aircraft in 2017, a production record, despite delays in engine deliveries from suppliers. On regional markets the French CAC closed up 72.40 points at 5,389.29, the German DAX closed up 197.06 points at 13,058.55 and the Spanish IBEX closed up 123.60 points at 10,208.60.

FTSE

The FTSE 100 closed higher on Monday but off earlier highs even as investors welcomed the passing of the US tax reform bill, but was held up by the lack of a widely-expected breakthrough in the Brexit negotiations, reportedly on the back of opposition from the DUP. Prices for 10-year Gilts continued their wild gyrations, with selling on Monday pushing the yield on the benchmark issue of that maturity higher by five basis points to 1.29%, as the White House’s tax cut plans gathered pace. A day of rumours surrounding Brexit dominated the day; there were claims and counter-claims which left investors unsure as to what the outcome was likely to be. As the session wound down in London it looked like, contrary to earlier reports, that there will not be a deal between the UK and the EU. Even if there had been a deal, it is not clear whether the DUP would have accepted it. Critically, according to the BBC’s Laura Kuenssberg a deal between London and Brussels was “sunk” by an angry reaction from the DUP to possible concessions to Dublin. Westminster had reportedly been prepared to accept that Northern Ireland could remain in the customs union and single European market in everything but name. Economic data showed that the Markit/CIPS UK construction purchasing managers’ index jumped to a five-month high of 53.1 for November from 50.8 in October, well ahead of forecasts for a reading of 51.0. Companies that featured included US-exposed equipment rental firm Ashtead and building materials group CRH which gained on the back of the passing of the US Senate tax bill. Broadcaster Sky moved higher amid news that 21st Century Fox has restarted talks over a possible sale to Walt Disney. Rio Tinto was higher as it appointed non-executive director Simon Thompson as chairman with effect from 5 March 2018, succeeding Jan du Plessis. Consumer goods giant Reckitt Benckiser was lower after being cut to ‘add’ from ‘buy’ at AlphaValue. The FTSE 100 closed up 38.48 points at 7,338.97.

Economic News Expected Today

 USA

Type Period Forecast Previous Importance
Trade Balance Oct -47.50B -43.50B Medium
Redbook Nov   -0.2% m/m; 4.8% y/y Low
Services PMI Nov 55.4 54.7 Medium
Composite PMI Nov   54.6 Medium
IBD/TIPP Economic Optimism Dec 54.6 53.6 Low
ISM Non-Manufacturing PMI Nov 59.1 60.1 High

Economic News Expected Today

EU  Eurozone

Type Period Forecast Previous Importance
Industrial Production (Spain) Oct   3.4% y/y Low
Services PMI (Nov) Nov 55.0 54.6 Medium
Services PMII (Italy) Nov 55.3 52.1 Medium
Services PMI (France) Nov 60.2 60.2 Medium
Composite PMI (France) Nov 60.1 60.1 Low
Services PMI (Germany) Nov 54.9 54.9 Medium
Composite PMI (Germany) Nov 57.6 57.6 Low
Services PMI (euro zone) Nov 56.2 56.2 Medium
Composite PMI (euro zone) Nov 57.5 57.5 Medium
EU Finance Ministers Meeting Dec     Medium
Retail Sales (euro zone) Oct -0.7% m/m; 1.7% y/y 0.7% m/m: 3.7% y/y Medium

Economic News Expected Today

UK United Kingdom

Type Period Forecast Previous Importance
BRC Retail Sales Monitor Nov   -1.0% y/y Medium
Services PMI Nov 55.0 55.6 High

Other Global Economic Data Expected

 

Type Period Forecast Previous Importance
RBNZ Governor Spencer Speaks (New Zealand) Q3     Medium
Current Account (Australia) Q3 -9.2B -9.6B Medium
Retail Sales (Australia) Oct 0.3% m/m 0.0% m/m High
Caixin Services PMI (China) Nov 51.5 51.2 Medium
RBA Interest Rate Decision (Australia) Dec 1.50% 1.50% High
RBA Rate Statement (Australia) Dec     High
BoJ Core CPI (Japan) Nov 0.5% y/y 0.5% y/y Low
Trade Balance (Canada) Oct -2.70B -3.18B Medium

Economic News Round Up MarketsWorld Bars

U.S. factory orders fell in October, but by a lower margin than forecast. The U.S. Census Bureau reported that factory orders declined by a seasonally adjusted 0.1% in October, compared to forecasts for a drop of 0.4%. Factory orders rose 1.7% in September in an upward revision from what had been a 1.4% gain. Factory orders excluding transportation advanced 0.8% in October, compared to the prior month’s 1.1% gain which was revised up from an initial 0.7% increase.

UK construction sector activity grew more than forecast in November, hitting its fastest pace in five months. IHS Markit and the Chartered Institute of Purchasing & Supply reported that their UK construction purchasing managers’ index rose to a seasonally adjusted 53.1 last month from October’s reading of 50.8. Forecasts were for the index to edge up to only 51.0 in November.

Japanese consumer confidence improved in November to its highest level in four years, lifted by surging stock prices and a robust job market. The Cabinet Office reported that the sentiment index for general households, which includes views on incomes and jobs, rose 0.4 point from the previous month to 44.9, up for a third straight month and marking the highest since September 2013.

Forex Round Up MarketsWorld Bars

The U.S. dollar was higher against most of the other major currencies on Monday after the U.S. Senate passed a tax bill at the weekend, while sterling gained ground on reports of a breakthrough in Britain’s Brexit negotiations. Talks were due to begin later in the week on reconciling the Senate version of the tax bill with a separate version already passed by the House of Representatives so a final bill can be sent to President Donald Trump to sign into law. However investors remained cautious amid concerns over the ongoing Russia probe, following reports on Friday that former national security adviser Michael Flynn is prepared to testify against Trump in the ongoing investigation. The dollar gained ground against the yen with the USD/JPY up 0.66% to a two-and-a-half week high of 112.92. The euro slipped lower against the dollar with the EUR/USD down 0.4% at 1.1848. Sterling was broadly higher following reports that Britain and the European Union reached a deal on the Irish boarder, which has been a sticking point in divorce talks. With the clock ticking down to the March 2019 exit date, British Prime Minister Theresa May is under pressure to conclude phase one of the talks in order to start negotiations on future trade ties by the end of the year. The GBP/USD had been up at 1.3516 on Brexit hopes but fell sharply as it became clear no further progress had been made, the GBP/USD dropped to 1.3414 before settling at 1.3455. The euro was also lower against the pound with EUR/GBP down 0.66% at 0.8776. The U.S. dollar index was up 0.37% to 93.18 after going as high as 93.32 earlier.

 
Commodity Round Up MarketsWorld Bars

Gold and silver prices were lower on Monday as investor risk appetite returned to the world marketplace to start the trading week, after the U.S. Senate Saturday passed a tax-reform bill. February gold was down $5.80 an ounce at $1,276.60. March silver was do wn $6.3 cents at $16.325 an ounce.

Oil prices settled lower on Monday as traders took profits following the recent rally which followed last week’s decision by Opec and some non-Opec producers to extend output curbs. West Texas Intermediate crude futures for January delivery fell 1.5% to settle at $57.47 a barrel. Brent crude fell 1.8% to settle at $62.48 a barrel.

The MarketsWorld Overview MarketsWorld Bars

The services sector report in the U.S. is part of the build up towards the important Non-Farm Payrolls which are due to be released on Friday. In October the ISM Non-Manufacturing PMI came in with a reading of 60.1, a very high level which reflects robust growth. The figure for November is projected to be slightly lower: 59.1 points.

 

 

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The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Any opinion offered herein reflects Barry Jenkins’ (MarketsWorld Analyst) current judgment and may change without notice. Users acknowledge and agree to the fact that, by its very nature, any investment in shares, stock options and similar and assimilated products is characterized by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable. This message is intended for recipient only and not for further distribution without the consent of MarketsWorld.

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