Thanks Giving in the United States typically reduces volumes in markets with traders away from their desks. This year has been no expectation.
European indices took the reduced liquidity as an opportunity to grind higher yesterday, and these gains continued into Friday’s session.
The FTSE 100 was 0.3% higher while European indices were broadly flat, although in positive territory.
After Federal Reserve minutes on Wednesday, analysts at AJ Bell highlighted a subtle shift in markets that are now becoming slightly more optimistic we could be approaching an inflection point after a year of tighter monetary conditions.
“Investors might not realise it, but we’ve just had an important week in terms of the potential direction of markets going forward. Signs that the Federal Reserve might slow down the pace of interest rate hikes is the first step towards the pivot in strategy desired by so many investors,” said Russ Mould, investment director at AJ Bell.
China
As political disruption in the UK and the US midterms fade into the rear view mirror, China has increasingly stole investors attention as the world’s second largest economy battles with COVID.
Rumours the Chinese authorities were considering the end of their Zero Covid policy have been quickly followed by reports of empty subways and deserted streets in China’s largest cities.
Nevertheless, investors have been betting on a response from China by buying into Chinese stocks and have been rewarded with a cut in the Chinese RRR to help stimulate the economy.
The cut will unleash billions of yuan into the system and ease financial conditions ready for the resumption of normal activities.
The FTSE 100’s China-exposed stocks provided little reaction to the news with miners and Asia-focused banks such as HSBC and Standard Chartered hardly moving. These sectors have moved higher in recent weeks and the move to ease by China is largely priced in.
UK Housebuilders
The UK housebuilders were among the FTSE 100 worst performers after Berenberg cut their price forecasts in a bearish note.
“It has slashed pre-tax profit forecasts for the sector by 40% on average, saying a trough in earnings won’t happen until 2024. This may surprise investors who took the view that so much potential bad news was already factored into the value of housebuilders’ shares,” Russ Mould said.