Jump to content

Gold recovers amidst fears over a weakening dollar - EMEA Brief 22 Nov

DanielaIG

  • After yesterday´s meeting in Brussels, Theresa May said “both sides have given sufficient direction” and she will meet Jean-Claude Juncker again on Saturday “to discuss how we can bring to a conclusion this process and bring it to a conclusion in the interest for all our people”, indicating that a final deal is likely to come very soon.
  • The 27 remaining countries in the EU will meet with Theresa May on Sunday, where they will vote on the Brexit deal. Spain, the only country that was set to veto the UK´s exit agreement over ongoing territorial disputes regarding Gibraltar, seems to have reached a separate pre-agreement deal with the UK over the territory in question.
  • US stocks bounced back on Wednesday and hit resistance levels. Even thought the Dow Jones closed slightly lower, it was trading 1% higher at midday, whilst the S&P500 and the Nasdaq closed at a gain of 0.39% and 0.92% respectively.
  • European stocks were also trading higher on Wednesday as the Stoxx 6oo index rose 0.7%, the CAC 40 was up 0.6%, the DAX and the IBEX 35 both gained 1%, and the FTSE 100 was up by almost 1.5%.
  • Chinese stocks start the day with uncertainty as the Shanghai Composite was trading 0.5% lower by the end of the morning session, and the Shenzhen dropped 0.3%, as investors remain cautious ahead of the G-20 meeting between Xi Jinping and Donald Trump on Dec 1. The rest of Asia saw a more positive start to the day, as both the Nikkei 25 and the Topix saw gains of 0.6%. The positive movement extended also to Australia, as the ASX 200 saw gains of around 1%.
  • Gold bounced back on Wednesday as it traded above $1,220 per ounce, inching closer to $1,300, price at which it started off the year.
  • Oil prices recover on Wednesday but take a negative turn on the Asian afternoon trading session, as crude futures falling 0.4% and Brent slipping 0.3%
  • The European Commission is looking in to sanctioning Italy over its debt budget indiscipline. They will demand Italy to explain how it will remedy its budget plans in order to abide by EU rules. If Italy fails to do so, the EU could open a “debt-based Excessive Deficit Procedure (EDP)”.
  • Consumer confidence for the month of November fell to 97.5, down from the previous month´s 98.6. The survey is based upon 500 consumers´ sentiment towards economic and political matters such as personal finance, government policies and unemployment.
  • US durable goods fell 4.4% last month. The decline is believed to be led by US companies being cautious about spending resources amidst ongoing trade wars with China.

Asian overnight: A largely bullish session overnight saw some reprieve from the wider bearish trend, following on from a US and Europe rebound yesterday. Chinese stocks were the one outlier, with the Shenzhen composite trading in the red. Meanwhile, the dollar was grinding lower, following reports that the Fed could end their tightening cycle as early as next spring.

UK, US and Europe: Brexit hopes are up again as a deal seems to be inching closer after Theresa May's meeting with European Commission head Jean-Claude Juncker ended with "very good progress" and a new meeting for Saturday seems to indicate that a deal is more likely to happen than not. Spain seems to have reached a pre-agreement with the UK which could ensure that the future of Gibraltar would be settled directly with Madrid, leaving it out of the EU exit agreement.

Looking ahead, the US Thanksgiving holiday, coupled with a general lack of economic releases throughout Europe and Canada means we could have a relatively quiet session. Any fundamental drivers will have to be already in play or coming from left field. Thus stay aware of any potential shift in the state of play for Brexit, with talk of the Germans pulling out of Sunday's EU summit already worrying markets. It seems that for all the UK misgivings over the proposed deal, it is not a guaranteed that it would pass through the EU either.

Gold has reacted in an atypical way in the last few months. Usually a safe heaven when bear markets occur, gold has lost about $100 per ounce since the beginning of the year, despite trade sell offs and a slowing economy sending equities into bearish territory. This could change going forward, as tightening monetary policies and slowing economic growth could weaken the dollar, the main factor working against gold, leading to an increase in the value of gold as a safe heaven. Join the chat about the future of gold today at 1pm UK time as we sit down with professional investor Simon Popple and Ross Normal, CEO of Sharps Pixley, where you will be able to ask questions on  a live Q&A. You can leave your questions on the comments sections of the following link:

 

Economic calendar - key events and forecast (times in GMT)

22Nov.PNG

Source: Daily FX Economic Calendar

3pm – eurozone consumer confidence (November, flash): index to rise to -2.4 from -2.7. Market to watch: EUR crosses

Corporate News, Upgrades and Downgrades

  • GVC has acquired Australian firm Neds International for A$95 million. 
  • Centrica maintained its full-year outlook, despite a weaker performance from its exploration and nuclear divisions. 
  • Mothercare said that like-for-like sales fell 11% during the first half, while adjusted pre-tax losses rocketed to £6.2 million from £2.6 million. 

Aeroports de Paris raised to sector perform at RBC
Centamin upgraded to outperform at RBC
Just Eat upgraded to neutral at JPMorgan

Fortum downgraded to hold at HSBC
Halma cut to equal-weight at Morgan Stanley

IGTV featured video

 

 

Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.



0 Comments

Recommended Comments

There are no comments to display.

Your content will need to be approved by a moderator

Guest
You are commenting as a guest. If you have an account, please sign in.
Add a comment...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

  • Blog Statistics

    • Total Blogs
      3
    • Total Entries
      295
  • Our picks

    • US Fed watch: APAC brief 19 Dec
      US Fed watch: The US Fed meeting has been kickstarted and the markets are shuffling around in anticipation. US equities at time of writing are putting in a mixed performance, though al major Wall Street indices remain trading below key technical levels. It comes following a day in which Asian and European markets sold-off in sympathy with Monday night’s rout in North American shares. A desire for safety has supported a bid in US Treasuries: they are higher across the board. Interest rates traders are also grinding away, pricing out point-by-point interest rates hikes from the Fed in 2019. The US Dollar has dipped as traders take safety in other haven currencies: the US Dollar Index is below 97, mostly courtesy of a play into the EUR and the Japanese Yen. The weaker greenback has provided a lift in gold prices, with the yellow metal trading just below support at $US1250 per ounce.


      The Fed’s biggest critic: Everyone has an opinion on what the Fed ought to do, it seems. The most powerful voice of all, US President Donald Trump, has certainly weighed in on the subject, Tweeting: “I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!” Never mind that President Trump’s policies, from major tax cuts and his trade war have contributed to the Fed’s invidious position. The President clearly is noting his concern about one of his hitherto favourite measures of personal success: the health of the US stock market. Whether rightly or wrongly, market participants, as contained within the price action in global markets, appear to agree with President Trump.
      • 0 replies
    • Indicator update: Customising RSI levels
      On the back of client feedback we now offer the possibility to customise the RSI levels on desktop and mobile devices. To do so, click on the RSI label once you have enable the indicator on your chart. This will open a dialog box that will allow you to change the levels (which are set at the default levels of 30/70), as well as customise the period and the colour of the lines.
      • 2 replies
    • FOMC - Wednesday 1900 GMT
      Trend of boring FOMC meetings likely ending tomorrow, expect significant USD and index moves through the rate decision. 25 bps rise expected but by no means certain, Trump already on the warpath.
      • 0 replies
  • Latest Forum Topics

×