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.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.