Optimism was the name of the game in trading on Monday as the FTSE joined its European peers rallying higher. As shoppers were taking advantage of Cyber Monday discounts, bargain hunters were also scouring global markets. On the FTSE, rebounding oil prices, boosting oil majors and a strong showing from financials overshadowed a drop in base metal prices dragging on the miners.
Banks put in a noticeably strong performance with the likes of HSBC, Royal Bank of Scotland and Barclays dominating the upper reaches of the FTSE. Banks surged thanks to a double whammy of Brexit optimism, following the signing off the Brexit deal by EU leaders, and the spill over effect from Italy potentially avoiding disciplinary procedures from Brussels.
Italian banks jump on Italian budget progress
The Italian banking sector enjoyed its best session since June amid signs that the Italian government was bowing to pressure over its excessive spending plans. Rome’s draft budget had put the country on course for disciplinary action from Brussels. Talk today of reducing next years budget deficit to as low as 2% of GDP down for 2.4% in the original draft budget, is definitely a step in the right direction. Not only is it a sign at the 11th hour of the Italian government showing a more conciliatory tone, but it is also a significant climb-down. Reducing the budget deficit by 0.3% - 0.4% would make a difference to Italy’s position, particularly given that the vulnerability of the Italian economy.
Draghi sends euro lower
The euro surged early on, on signs of progress in Italy; however, pulled off session highs later in the day. Weaker than forecast IFO business sentiment data, in addition to Draghi’s acknowledgement of a recent softening in eurozone data unnerved euro traders sending the euro lower. Whilst underlying drivers of domestic demand continue, risks relating to protectionism, global growth and market volatility remain prominent. With the additional help of a slightly stronger dollar, the euro has given up all its gains and is back at break even.
Black Friday & Cyber Monday keep retailers in focus
Retailers were in focus on both sides of the Atlantic, as spending figures came rolling in from across the weekend. With US consumers spending 24% more than a year ago the likes of Amazon were moving higher. Black Friday sales in the US reportedly hit $6.2 billion, whilst UK sales are expected to touch £7.7 billion from Friday through to Monday. Given the struggles that the UK high street has suffered across the year, these figures could be an encouraging sign that the retailers are off to a strong start to the all-important holiday season. However, the data could also be a sign that the consumer is becoming savvier and taking advantage of significant discounts ahead of a notoriously expensive few weeks.