Dollar Dips After Treasury Pick, Bonds Rally

The US dollar dipped and 10-year Treasury yields fell by 6 basis points following the announcement of Scott Bessent as the incoming US Treasury Secretary. Bessent's fiscal hawk stance, coupled with his support for tariffs and a strong dollar, has raised expectations for a more conventional economic policy. The European Central Bank (ECB) faces growing market expectations for a rate cut in December, while inflation figures in the US and EU are set to influence future decisions.

Equities

The FTSE 100 closed 1.4% higher on Friday, logging its strongest weekly performance in over six months with a 2.5% gain. The rise was driven by the weakening pound, which fell to its lowest level since May, as data revealed a contraction in UK business output and a significant drop in retail sales. The fall in the currency benefited UK-listed international companies, including AstraZeneca, Unilever, and Reckitt Benckiser, whose shares rose as a result of their overseas earnings.

However, the pound's decline pressured domestic UK sectors, particularly banks, which faced losses. Barclays, HSBC, and Lloyds Banking Group saw their stock prices fall between 0.3% and 2.1% due to weak business activity data. Despite the gloomy outlook for the UK economy, large overseas-focused companies saw a boost, reflecting the impact of a weaker pound on their earnings.

In the US, Wall Street also closed higher, with all three major indexes posting weekly gains. The Dow Jones rose 0.97%, the S&P 500 gained 0.35%, and the Nasdaq added 0.16%. The Russell 2000 index, which tracks smaller companies, outperformed larger stocks, rising 1.8% and gaining 4.3% for the week. This came amid encouraging data showing strong business activity in the US, with a key measure hitting a 31-month high in November.

Among US companies, Gap surged 12.8% after raising its annual sales forecast, while Intuit fell 5.7% following its lower-than-expected revenue and profit projections for the second quarter. Alphabet saw a decline of 1.7% amid ongoing legal challenges related to accusations of monopolising online search, while Nvidia slipped 3.2% after its quarterly forecast.

Forex & Commodities

The Indian rupee is set to make mild gains as it opens at 84.38-84.39 against the US dollar, compared to 84.4450 in the previous session. This comes as the dollar softens by 0.5% after a two-year high, following the announcement of Scott Bessent as the new US Treasury Secretary. Analysts suggest that Bessent’s appointment may ease fears of severe tariffs under the incoming Trump administration, offering some relief to markets. The Reserve Bank of India’s intervention and MSCI’s rebalancing, expected to draw $2.5 billion in inflows, also provide support for the rupee.

Gold dropped nearly 2% as profit-taking followed a five-day rally. Spot gold fell by 1.8% to $2,664.53 per ounce, pressured by expectations that Scott Bessent’s appointment could reduce trade uncertainty, dampening gold’s appeal as a safe haven.

Oil prices slipped after strong gains last week, with Brent crude down 0.57% at $74.74 per barrel. Tensions between Russia and Ukraine, alongside Iran's nuclear developments, continue to support oil prices, as investors monitor geopolitical risks.