Commodities drag on dollar strength

A somewhat uninspiring start to the week has seen the FTSE attempt to regain the ground lost in the first hour of trading, only to give those gains up later into the session. 

Miners at work
Source: Bloomberg

The optimism seen throughout last week is clearly fading as we fast approach December, which is expected to see the Federal Reserve hike rates. While the European Central Bank could also take contrasting action to soften the blow of any rate hike, the rally we have been seeing in the US dollar has led to yet another commodities rout, which will no doubt put a bearish tone on the FTSE in coming weeks.

While supermarkets have led the FTSE lower today, we are once more looking at gains for many defence and security stocks, with BAE Systems, Cobham and Rolls-Royce part of a very exclusive list of gainers today. Following the Paris attacks, we are seeing a clear shift away from austerity and instead towards expansion of military capabilities, which will ultimately benefit defence manufacturers more than most.

Buy the rumour, sell the fact was proven to be the case today when Allergan and Pfizer announced they will merge to create of the world’s biggest drugmaker in the second half of 2016. Despite today’s fall in the share price, the firm stands in good stead to dominate the sector going forward, and long-term investors will once more take precedence over short-term speculative buyers.

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