Market Update 25/11/13

One line- Iranian deal sparks risk on moves while oil sells off and the dollar continues to strengthen.

- A deal was made with Iran yesterday that trades a reduction in sanctions for a slowdown in the country's nuclear programme. The Iranian economy is struggling with high inflation, unemployment and a continuing recession. Its currency has lost 50% of its value over the last two years while the deal helped the rial rally 2%. While the US, Britain, France, Germany, China and Russia hailed the deal as a great success Israel and Saudi Arabia did not lend their support worrying that the deal gives Iran too much freedom to continue enriching uranium. http://www.ft.com/cms/s/0/a1769f46-5518-11e3-a321-00144feabdc0.html?siteedition=uk#axzz2leBNNo3r

- The Iranian deal is causing broad risk on moves in the market with equities rallying while Treasuries, the yen and gold sell off. The Nikkei added 1.5% overnight while the FTSE is up 0.5% this morning. Brent and WTI took a beating on the news losing 2% and 1.34% respectively. The dollar is showing continued strength as the yen reaches 101.73 and the euro slips to $1.3532. http://www.ft.com/cms/s/0/2647abca-5582-11e3-86bc-00144feabdc0.html?siteedition=uk#axzz2leBNNo3r

- The lack of a deal to create a "grand coalition" in Germany is beginning to weigh on the country as Merkel is unable to move on urgent European policy decisions. Both parties have been under fire more making policy concessions in an effort to form a working government. The expectation is that this week they will reach some agreement as they look to assign cabinet posts.  http://uk.reuters.com/article/2013/11/24/uk-germany-coalition-idUKBRE9AN0GP20131124

- Data released this week is expected to back up Draghi's case to reduce intereste rates for the Eurozone. Inflation is expected to be close to 0.8% while the jobless rate is likely to still be at record highs of 12.2%. http://www.bloomberg.com/news/2013-11-25/europe-twin-woes-fester-in-draghi-job-to-inflation-fight.html

- After two years of continuous decline in the polls for Spanish prime minister Mariano Rajoy a turn around in sentiment is taking place. Confidence on the Spanish economy as well as that Rajoy will retain power in two years is growing. Spain's recession is finally over while bond yields have stabilised on the other hand unemployment is stubbornly high at 26.6%. http://www.ft.com/cms/s/0/ba115508-5362-11e3-b425-00144feabdc0.html#axzz2leBNNo3r

Data

S&P 1804.76 0.50%

FTSE 6702.82 0.43%
Nikkei 15,619.13 1.54%

EUR/USD- 1.3515 0.32%
USD/JPY- 101.73 0.46%
GBP/USD- 1.6194 0.20%

Gold- 1230.79 1.05%
Oil (Brent)- 108.91 1.93%

Copper- 321.55 0.09%

 

 

10 year yields

US- 2.75 (+1bps)
UK- 2.78 (-1bps)
Japan- 0.63 (+1bps)