FTSE lifts itself from the doldrums

The FTSE 100 is testing the highs seen earlier in the week, as the US dollar gains on hopes of a tax reform deal being signed into law.

Currency weakness buoys European markets
Halifax house price index lifts homebuilders
Gold tumbles to four-month low

European markets have clocked up steady gains after a trying week for equities. Weaker home currencies have allowed the likes of the FTSE, Dax and CAC to have another go at playing catch-up with their US brethren, with bullish sentiment enhanced by the prospect of a rebound in tech stocks in the US. As before, it is the prospect of a successful US tax reform programme that lies behind the US dollar strength, but sterling's weakness has been given added spice by the ongoing bout of uncertainty over whether the UK and the EU can make any further progress. In London homebuilder shares are holding their ground after Halifax reported a 3.9% rise in prices over the past year. However here too any
excitement has been contained by the knowledge that the Halifax survey remains an outlier compared to other surveys which point to further weakness. The recent strength in prices shown in this week's services PMI number will have plenty of investors worrying that the BoE might have to become more hawkish throughout 2018, if inflation starts to tick up again.

It has not been a good day for gold, with an early rout in prices coming off the back of two consecutive days of losses. Further USD strength will only exacerbate the situation, while the prospect of a Santa rally should mean that risk assets remain in favour to year-end. Ahead of the open, we expect the Dow to open at 24,169, 29 points higher from yesterday's close.

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