Oil stocks rise but homebuilders fall again

Housebuilders are languishing again but overall London is enjoying a good day, up 50 points.  

London Stock Exchange
Source: Bloomberg

Yet another day in the green for financial markets has seen the FTSE push towards a new two-week high as European indices seek to follow their US counterparts higher. The creation of a new all-time high in the NASDAQ this week has done a lot to restore confidence within the investment community, providing hints that we could soon see something similar across Europe.

The dominant FTSE 100 gainers of the day clearly come from the oil and gas sector, feeding off the back of a 10% gain in crude over the past week. Homebuilders remain firmly in the red for the second consecutive day, which is likely to reflect the expectation that rates will begin to rise once more in the coming months. A note from Liberum on Tuesday clearly points towards a view that homebuilders appear ‘fully valued’ and with many at all-time highs, traders are becoming weary of the sector as a whole.

Mario Draghi has done little to dispel expectations of an expansion to ECB QE at its December meeting, with the president once more giving a heads up that the current policy will be reviewed in little over a month. This clearly gives a greater emphasis on eurozone data in the lead up to the meeting.

Today’s US non-manufacturing PMI spiked to the second highest reading of the last ten years, bringing with it greater expectations of a US rate rise in December. Services account for approximately 79% of US GDP and thus today’s reading will no doubt have substantial implications for growth expectations. Things are shaping up for a big December, with both the ECB and Fed moving in contrasting monetary directions.

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