FTSE 100 finishes the week strongly as mining sector gets an upgrade

European markets have got off to a solid start to the month with Anglo American and Antofagasta leading the FTSE 100 higher after being upgraded to buy by UBS, who argued that 2024 was likely to be a better year for copper prices, and as such these two miners should benefit the most from that from a valuation point of view. Today’s upgrade has also helped lift the rest of the sector as well, with Rio Tinto and Glencore also gaining.

Europe

The resilience in the mining sector hasn’t been affected by poor manufacturing PMI numbers out of Europe, which pointed to weak demand, falling prices and the prospect of another quarter of negative growth for the bloc.

On the downside Tescoshares have slipped after being on the receiving end of a downgrade from JPMorgan with a price target of 230p, with Ocado and Sainsbury's also sliding back.

On the week it’s been a mixed bag for UK markets, with the FTSE 100 set to finish higher for the second week in succession, and the FTSE 250 finishing lower for the second week in a row.     

US

US markets opened mixed with the Nasdaq 100 sliding back while the Dow edged higher, with the focus on Fed chairman Jay Powell’s speech later today and the latest ISM manufacturing survey for November. Today’s manufacturing report was somewhat of a mixed bag, disappointing on the headline number, coming in unchanged at 46.7, while prices paid jumped to 49.9, from 45.1, while the employment component sagged to 45.8, from 46.8.

Pfizer shares have also tumbled after the pharmaceutical giant called time on its weight loss pill due to side effects which adversely affected half of the people who took and which caused nausea and vomiting.

Tesla shares have slipped back on disappointment over the pricing of the various Cybertruck models which some felt could have been pitched higher.

Dell Technologies is under pressure after disappointment over its Q3 numbers as well its forecast for Q4 revenue. Q3 revenue came in at $22.25bn short of forecasts due to underperformance in the sale of PCs, which is expected to continue over the rest of the year. Q4 revenue is forecast to come in between $21.5bn and $22.5bn. Q4 profits are expected to be between $1.60 and $1.80 a share, short of estimates of $1.81.

FX

A bit of a mixed bag for currencies to end the week and to start the final month of 2023, the euro has continued to look weak, as markets continue to price the possibility that the ECB might be forced to be the first central bank to cut rates. Today’s disappointing manufacturing PMI numbers serve to reinforce the challenge facing the ECB, while France’s Villeroy said that rate hikes are over with the current data supporting the view that inflation is on course to return to 2%. Against the pound the euro slid to its lowest level in over 2 months below 0.8600.

It's been another positive week for the pound, its third weekly gain despite the pullback in the US dollar in the last couple of days, with the latest UK data, while disappointing showing slightly more resilience than its European counterparts and as such forcing the market to take the view that the Bank of England will likely be less dovish than its peers when it comes to when it is likely to look at rate cuts in 2024.

Commodities

It’s been a good week for gold, the yellow metal is on course for its third week of gains and is within touching distance of new record highs, helped by the slide in yields and increased speculation that we could start to see rate cuts during the first half of 2024.

Oil prices have seen another disappointing week, despite touching a 3-week high yesterday as markets remain sceptical that the pledge to cut output by another 1m barrels a day will actually be achieved. We’ve already seen splits amongst some members and the more time elapses that consensus could fracture further.

Volatility

Oil prices were in focus on Thursday after the delayed OPEC+ meeting agreed on deeper production quota cuts. However, the outcome was still seen by the market as somewhat underwhelming, with WTI selling off close on five dollars as a result. One day vol on the contract came in at 62.01% against 34.02% for the month.

The US Dollar remains broadly on the back foot amid slowing inflation and mounting expectations that the Fed is moving towards easing back on its monetary policy. Comments from Jerome Powell are due later today and this could offer further clues as to how long the market will need to wait for a rate cut but Dollar-Swiss traded down to three-month lows on Thursday with one day vol of 9.99% against 7.18% for the month.

Our proprietary Oil & Gas basket, covering 10 US companies across the sector, also saw elevated levels of price movement on Thursday. The OPEC meeting contributed here but in addition the biggest constituent – Phillips 66 – is also locked in a battle with activist investors, something that saw its underlying price add more than 5%. One day vol on the basket stood at 42.89% compared with 27.99% on the month.

And the FTSE 100 was one of the most active equity indices after a brief bout of selling in early trade was reversed. The contract traded in a range of more than 100 points with one day vol of 13.69% against 10.82% for the month.