Mining and banking knock euro

An investor aversion to the key mining and banking components on the UK benchmark today ensured that even Vodafone takeover speculation could not boost the FTSE to a weekly close above 6754 – something that has not occurred in over 13 years.

Revelations of foreign exchange manipulation by global banks has only served to further erode investor confidence and trust in the sector.

October saw solid UK manufacturing

Many questions in relation to Royal Bank of Scotland prospects were answered this morning as the bailed-out bank made the decision to create an internal ‘bad bank’ while ring-fencing $40 billion worth of bad debt. While it may be good news to leave the taxpayer out of the equation, shareholders of the stock were less than impressed with potential losses due to the debt write-down; shares fell 7.4%.

Strengthening factory activity in China should have supported the mining sector today, yet mixed signals coming from the second biggest economy in the world imply that any recovery in export orders remains subdued. The decline in the precious metals sector has also weighed on the industry, with Polymetal International and Randgold Resources registering losses of 6.13% and 3.84% respectively.

Despite no comment from the alleged participants, investors have been betting on a potential takeover of Vodafone by US telecom giant AT&T, sending the former's share price up by over 3% to a 12.5 year high. 

Macro data from the UK continues to keep economy watchers happy. The fastest growth in export orders in over two years has ensured a solid manufacturing output for October. 

US traders risk averse

The attempt to recover from a two-day losing streak appears – at time of writing – to have been unsuccessful in the main US indices today, with traders unwilling to take on much risk ahead of the weekend.

Comments from US Federal Reserve member Charles Plosser in regard to the missed opportunity to taper asset purchasing in September were digested as being rather hawkish by market participants, and helped to take the froth of the recent highs in the S&P 500.

Strong ISM factory output from the US may also have added to taper fears, coming in ahead of expectations at 56.4. Auto sales and the recovery in the housing market have helped to push this index higher and have added to prospects for a more sustained US economic recovery.

Next week sees the IPO of the much anticipated Twitter placement. While the company itself is pricing shares between $17 and $20, IG’s grey market implies the share price may double on the first day with market capitalisation trading around $22bn.

The Dow is currently trading fairly flat on the day at 15,544.

ECB to cut rates

The US dollar continues to find capital flow as the taper speculation heats up. Helping this along is the fact that many investment banks are expecting the European Central Bank to cut rates next week. This has been a boon to what has been deemed to be an over-strong single currency and helps to allay any fears that the meagre export-driven recovery will be crushed.

Stronger dollar rocks gold 

Gold is behaving more like a volatile currency than a safe haven. The fall back towards the $1300/oz mark today has ultimately been as a result of a distinct lack of inflationary concerns and the renewed strength in the US dollar. The rise in equity markets lately has also been something of a draw to investors who see capital appreciation more attractive than capital preservation.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

Een artikel zoeken

Form has failed to submit. Please contact IG directly.

  • Ik wens per e-mail informatie van IG Group bedrijven te ontvangen over handelsideeën en IG's producten en diensten.

Voor meer informatie over hoe wij uw gegevens mogelijk kunnen gebruiken, bekijkt u ons Privacy- en toegangsbeleid en onze privacy website.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.