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FTSE recovers as UK government proposes to double budget on housing
The FTSE is up by 0.55% in London, the construction companies lead gains as the UK government offered to double its spending on housing. Persimmon rallied over 4%, Taylor Wimpey and Barratt Developments surged 3.9% and 3.6% respectively. On the other hand, UK miners remain under pressure as copper futures give signs of a new slide down to $2/lb.

The US dollar is softer across the board; the US dollar index (DXY) eases from the 100 handle. The smoothness in the US dollar could well remain short-lived as US durable goods orders took a lift in October, the consensus is a 1.7% expansion in orders, off the 1.2% drop seen over the last month.

Approaching the Thanksgiving holiday, thin liquidity conditions will certainly keep the US stock markets choppy. The S&P 500 keeps on bumping its head into 2085/2100 offers, the Dow continues to face resistance at 18000. As the market positioning is based on a strong conviction for a December rate hike from the Fed, only a big surprise could move the stock market out of the current price ranges.

In Europe, equities opened higher in an effort to pair yesterday’s losses amid tensions between Turkey and Russia which dented investor appetite.

Parisian cafés lost 40% of their clientèle

Turning our heads back to Paris, it has been reported that the activity in cafes and bars in central Paris dropped by 40% while tourist bookings are down by approximately 30%. Despite fears however, the French consumer confidence remained stable in November.

The Eurozone bond yields tell a different story. Despite the rising terrorist threats and souring sentiment in the European streets, the appetite for investing in the Eurozone government debt remains very much up-to-the-minute.

We reiterate our cautious stance in Eurozone bond markets as the situation becomes rather alarming. The Dutch and Austrian 2-year yields hit all-time lows (-0.380% & -0.336% respectively), while Portugal managed to sell new debt in negative yields last week. There is a severe distortion in risk/return perception as the ECB is expected to expand its bond buying program as soon as its December meeting. The mispricing in the Eurozone bonds risk turns the EZ debt market into a fragile investment field. The vulnerability could rapidly translate into higher volatilities, especially as the market conditions get thinner before the year-end holidays.

Euro holds its ground at 1.06 against the US dollar. A part of the strength is explained by a short position unwind due to oversold conditions. As the RSI diverges from the oversold territory (36%), fresh incentive to build on the euro short positions will soon creep in. Hence, the upside corrections are seen as opportunity to sell and the upside potential is expected to remain capped at 1.0700/1.0750.

Market remains seller on the lira.

Tensions between Turkey and Russia continue to impact local markets. The lira extended losses toward 2.90 handle versus the US dollar as Borsa Istanbul traded down by 500 points this morning.

The geopolitical issue has rapidly lost its importance outside the Turkish borders as the risks of an escalating military interaction are very low at this stage. Although the Russian President Putin sounds very sharp on the matter, the Turkish response has been quite anodyne. Turkish President Erdogan has been crystal clear on the issue, stating that Turkey has no intension whatsoever to escalate the tensions.

Turkey prevents from adding more fuel on the fire and is looking to burry this unfortunate chapter rapidly.