Philly Fed hits 20-year high

Heading into the close, the FTSE 100 is down 15 points, although US indices are shaking off early losses to move higher.

A trader in the US watches the markets on multiple screens
Source: Bloomberg

Mining sector suffers losses

Morning losses have been regained in London during the post-lunch session, as optimism returns following strong numbers on the US economic front.

China weakness is still weighing down the mining sector, and as we look ahead to the final month of the year it is sobering to think that any FTSE 100 rally will probably have to go on without the raw materials sector. Anglo American, BHP Billiton and Rio Tinto were all down by 2% or more.

By contrast, Babcock advanced to the top of the scoreboard after strong results and a successful bid to acquire the Defence Support Group from the Ministry of Defence. Having seen the shares retreat from all-time highs over recent months, shareholders will be delighted that the company is now marching ahead in double-quick time.

Philly Fed data lifts US markets

The Philadelphia Federal Reserve might be mocked for its rather volatile readings, but when an index hits a 20-year high traders are liable to sit up and take notice. US indices opened lower, following the lead set by Europe, but rapidly found their footing as the business activity index jumped to 40.8, smashing expectations. It helps to confirm the generally upbeat tone regarding the US economy adopted in the Fed minutes, emphasising the difference between the eurozone and America.

After days of weakness, it was heartening to see the small cap Russell 2000 take the lead, rising 0.6%, with the S&P 500 up 0.1% and the NASDAQ up 0.3%. Only the Dow Jones was held back, with IBM knocking seven points off the index.

Gold's move higher continues

Oil prices got a lift after US data this afternoon, with traders cheered by continuing signs of recovery in the US that trump the stagnation in Europe. In recent days both Brent and WTI have found support, which gives hope that a bottom may now be in for the time being.

As we get closer to the OPEC meeting next week we can expect further rangebound trading as markets await news on planned supply levels for the year ahead. Gold’s move higher continues too, after all the Swiss-inspired excitement yesterday, although $1200 is still unbroken on the daily charts, an indication of how strong bearish sentiment still is here.

Pound back above $1.57

The pound continued its recovery from the lows of the week near $1.56, pushing back through $1.57 as retail sales showed signs of life among UK consumers. However, this looks like an oversold bounce and but a brief breathing space for GBP/USD.

Given that the broad interpretation of last night’s Fed minutes has been hawkish, we can expect to see fresh enthusiasm for the US dollar, as investors once again realise that the Fed is much closer than the Bank of England to a rate hike.

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