Risk appetite deteriorated as Asian traders handed over a mixed session. Nikkei (+1.10%), Topix (+1.33%) gained on a weaker yen, Hang Seng (-0.19%) reversed gains towards the closing bell, while Shanghai’s Composite remained flat (-0.06%) as the yuan’s depreciation lead some investors towards Chinese companies’ that have foreign businesses and assets abroad.
Despite the US dollar index rising to its highest since 2015, oil prices took a lift amid Saudi and Russian ministers' pre-OPEC meeting, which revived hopes for action in Vienna on November 30th. Nevertheless, the picture is getting complicated with the US protectionism, talks of possible reprise of sanctions against Iran, as well as higher US production to avoid the US from relying on OPEC production in the future. US crude inventories are due for release later today and a larger than expected increase should dent buyers’ appetite.
The FTSE opened range bound. Financials and energy stocks reversed the early gains.
The pound pared losses and tested the 1.25 handle in London, although the unexpected softness in UK inflation revived hopes that the Bank of England (BoE) would stay loose for a longer period of time. The BoE Governor Mark Carney noted that the bank is ready to tolerate an overshoot in inflation for ‘broad reasons’, as interpreted as Brexit uncertainties.
UK mining stocks raced ahead of the market at the London open, as Anglo American (+1.32%), Glencore (+1.35%) and BHP Billiton (+1.14%) bounced higher despite the overbought alert on European mining stocks.
Randgold Resources (+2.05%) is taking a breather on recovery in the gold market. We note that a large option expiry at $1250 could dent the upside momentum today, delaying a further recovery to $1241 (minor 23.6% retracement on Nov 9th to Nov 14th sell-off).
Financials appear to be losing the Trump-lead momentum. News that HSBC, J.P. Morgan and Crédit Agricole will be fined by the EU anti-trust regulators for fixing benchmarks related to the euro, could bring a pause to the recent sector rally, yet the encouraging prospects for the banking business under Donald Trump’s rule could keep the appetite firm in the months ahead.
With trade at the top of the agenda, expectations for a smooth running G7 Summit were low even before the meeting started. A