The FTSE 100 once again remains a leader in Europe, although the pullback in oil and precious metals has meant that commodity stocks are lagging behind as financials take the lead.
Strong gains for the likes of HSBC, Barclays, and NatWest bring a recovery from a sector that has been hit by Trump’s recent move to limit credit card interest rates to 10%.
However, today has seen a positive update out of the UK, with GDP posting a surprise monthly gain of 0.3% for the month of November.
This comes after an October contraction, which had been heavily impacted by a 27% slump in car production following a cyber-attack on Jaguar Land Rover. The snapback in manufacturing highlights how volatile monthly data can be, and why not every piece of data should be seen solely through a political prism. That being said, the underlying picture remains soft in the UK. Construction continues to deteriorate, with output falling again in November and now almost 3% lower since July. That mirrors the recent weakness seen in the construction PMI.
Oil prices have turned lower after Donald Trump cooled calls for near-term military action in Iran, saying he was reassured by information that the regime would stop killing people involved in the recent protests. While many will look at this as another opportunity for the US to open up a maligned nation to higher oil exports, the fact is that Iran already produces much more that Venezuela and that output is at risk if the government falls. Concerns around the potential disruption to the flow of oil through the straits of Hormuz, coupled with the potential impact on Iranian output in the event of a military conflict means that the recent bearish oil thesis has been turned on its head this week.
Looking ahead, traders remain cautious given the impending supreme court judgement over the legality of Trump’s tariffs in their current format. While the decision continues to be delayed, markets are pricing a high likeliness that the court rules against the President which both adds a huge dimension of uncertainty but also potential upside for companies whose margins have been squeezed by the tariffs. Notably, the US administration will have a raft of alternate methods lined up to reimpose tariffs in the event of a defeat, but that would invariably provide additional confusion as they once again rip up the rules and provide a new set of policies for businesses to adhere to.
