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MARKET WRAP: FTSE higher, Powell re-nominated as Fed Chair, USD strong

Economy7 hours ago (Nov 22, 2021 16:35)

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Key Points

FTSE 100 closing price of 7256.2, +0.5%
Powell renominated as Fed Chair, Brainard vice-chair
Telecoms higher after KKR bids for Telecom Italia
Hochschild Mining tumbles as Peru set to close its mines
USD strong, gold down on Powell nomination
Oil higher on reports OPEC may alter production plans
Bitcoin struggles to reclaim $60K

By Samuel Indyk – The FTSE 100 rallied and US stocks opened at record highs after the White House announced Biden had nominated Jerome Powell as Fed Chair and Lael Brainard as Vice-Chair.

“A continuation theme should be the dominant outcome from the Biden decision to stick with Chair Jerome Powell,” ING analysts said in a research note. “But there will be a more influential Brainard influence to be taken into account. And while we can’t ignore this, the overall policy thrust leaves us as we were. The Fed will still taper, and likely hike in 2022.”

Within the blue-chip index, telecoms were some of the best performing shares after KKR made a $12 billion takeover approach for Telecom Italia (MI:TLIT). Vodafone (LON:VOD) and BT (LON:BT) shares rallied in sympathy, with the latter already the subject of speculation after Altice’s Patrick Drahi built a 12% stake earlier this year.

“If private equity is starting to sniff around this sector then it suggests there could be value to be found in other names,” said Chief Analyst Neil Wilson. “It underlines just how unloved a corner of the market it has become.”

In the midcaps, Hochschild Mining (LON:HOCM) was the worst performing stock in the FTSE 250 after plans surfaced that Peru will not be granting additional approvals for some mining projects citing environmental concerns. Those projects included Hochschild’s Pallancata and Inmaculada mines and would essentially mean they are shutdown. THE FTSE 250 component said it is prepared to enter dialogue with the Peruvian government in order to resolve any misunderstanding but shares still plunged by over 50% at the open. By the close, shares had recovered some of the losses but sill ended lower by 26%.

The USD was strong following Powell’s nomination as Fed Chair, as the prospect of the marginally more dovish Brainard taking over the reins was ended, for now. Shorter-dated US paper sold off with the United States 2-Year moving higher. With a key risk factor out of the way, the focus may have been on late Friday comments from Fed’s Clarida, who said the Fed could consider discussing the pace of the planned taper at the December meeting, suggesting that the Fed may tighten faster than previously thought.

Gold was also weaker, although the yellow metal remained firmly above $1800/oz.

The EUR remained soft with EUR/USD trading below 1.1250 as rising COVID cases in Europe looking set to bring more social restrictions. Outgoing German Chancellor Angela Merkel called the current spike in infections “worse than we’ve ever seen”.

Oil prices had been lower for much of the day amid the rising COVID cases in Europe and after Japan confirmed they may join US efforts to curb oil prices by releasing reserves. India was also reportedly in consultations with the US on the release of oil from its strategic reserves.

However, WTI and Brent crude futures reversed course after Bloomberg reported that OPEC+ producers may adjust plans to raise production next month if other countries go through with a coordinated release of oil reserves, citing delegates. The group is set to meet on 2nd December to decide whether to increase production by the planned 400,000bpd from January.

Cryptocurrencies were trading mostly lower with Bitcoin remaining below $60,000.

“Most people seem to be of the opinion at this point that Bitcoin hasn’t peaked and new highs aren’t that far away, but as we’ve seen so often in the past, corrections can be deep and painful,” writes OANDA Senior Market Analyst Craig Erlam. “We may not be seeing that now but a failure to get back above $60,000 suggests 20% may not be as bad as it’s going to get.”


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MARKET WRAP: FTSE higher, Powell re-nominated as Fed Chair, USD strong

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