Financial market research and analysis

The US dollar softened against all of its G10 counterparts and a majority of emerging market currencies. US equities pared a major part of the Black Friday gains. The Dow Jones and the S&P futures retreated 0.39% and 0.47% respectively, while the Nasdaq futures write-off 0.36%. The overbought conditions in the US equity markets hint at a further short-term correction.

The US sovereign bonds and gold are expected to capture a part of the US equity outflows, given that the Trump victory and hawkish news regarding US monetary policy, have been mostly and aggressively priced in. There is no doubt that a correction in both equity and bond markets, as well as in the US dollar, is needed. The FOMC’s December meeting  on December 14 is no longer a ‘suspense’ event for the global markets.

Yet, December is still going to be an interesting month. Now that the FOMC event is pretty much priced in, the attention shifts to the European Central Bank (ECB). The ECB genuinely skipped investors over its last two meetings. President Mario Draghi hasn’t let out a single hint regarding the future of the ECB’s massive asset purchases programme (QE), due to end on March 2017. Hence, investors need to know whether or not the ECB would extend its purchases beyond the term.

While there is little doubt that QE will be extended beyond the first quarter of next year, investors lack concrete, official information about the size and the duration of the QE extension. This is why, Mr. Draghi’s speech before the European Parliament’s Economic Committee is crucial. We do not know whether Mr. Draghi will hint at a concrete plan of action plan the December meeting, yet we are certain that every word that will come out of his mouth has the potential to move the euro markets in one direction, or the other.

A quick take on Fillon’s nomination

François Fillon’s nomination for 2017 presidential election gave a fresh turn to the political mood in France.

Republican enthusiasm in Fillon’s nomination resembles former French president Nicolas Sarkozy’s rise back in 2007.

The CAC futures diverged positively compared to its European peers at the start of the week, yet the fall in energy prices have taken its toll on the CAC at the open. Energy stocks traded 1.60% lower in Paris, while utilities were the only gainers.

In the mid-run, the Republican rise could give a positive touch to French equities during the election campaign. We turn cautiously positive on French export, bank and technology stocks.