Last Week In Review: A Financial Roundup
Monday
FTSE rises as markets welcome Bessent as next US treasury secretary
The FTSE 100 started the week positively, rising 0.3% (25 points) to 8,287, driven by optimism over US President-elect Donald Trump’s choice of hedge fund manager Scott Bessent as treasury secretary. Investors believe Bessent, a former Soros Fund Management partner, may adopt a less aggressive stance on tariffs and support corporate tax cuts, easing concerns about inflationary pressures and boosting market sentiment.
European and Asian markets (excluding China and Hong Kong) also rallied, while the FTSE 250 gained 0.3% to 20,645. Despite the overall uptick, Kingfisher shares plummeted 12.4% following a 0.6% drop in third-quarter sales, with French sales declining sharply.
Separately, the Confederation of British Industry cautioned that higher employer national insurance contributions could hinder hiring and wage growth.
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Tuesday
Companies bolster currency hedging strategies as Trump plans tariffs
Multinational companies are ramping up their foreign exchange (FX) hedging strategies to protect earnings against potential currency volatility under a second Donald Trump presidency. Since the U.S. election on November 5, there has been increased interest in options and cross-currency swaps, particularly among companies in healthcare and industrial sectors.
Trump's protectionist trade policies, including proposed tariffs of 25% on goods from Mexico and Canada and 10% on Chinese goods, have already caused market reactions. The Mexican peso dropped 2%, the Canadian dollar fell 1.4%, and the U.S. dollar index rose 3.5%, driven by expectations of dollar-supportive policies under Trump. This volatility underscores the importance of hedging, especially given the potential renegotiation of the United States-Mexico-Canada Agreement in 2026.
Around 94% of senior finance executives in the U.S. and UK are adapting their FX hedging strategies, such as extending hedge durations or increasing hedge ratios. The focus is on currencies like the Mexican peso and the euro. A stronger dollar negatively impacts U.S. companies' foreign revenue, with 41% of S&P 500 revenues generated overseas.
Trump’s previous presidency saw significant currency swings tied to trade policies, and concerns persist about similar impacts on supply chains and global trade under another term. Additionally, central banks' efforts to balance growth and inflation while normalizing interest rates add to FX volatility. Companies are also bracing for potential disruptions in East Asia and Europe alongside North America.
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Wednesday
Just Eat to delist from London Stock Exchange to cut costs
Just Eat Takeaway, Europe's largest food delivery company, is delisting from the London Stock Exchange (LSE) to reduce costs, citing the administrative burden, complexity, and low trading volumes on the LSE. The company will now be exclusively listed on Amsterdam's stock market, where it is headquartered. This decision follows a broader review of its share listings and echoes a similar move in 2022 when Just Eat left the US Nasdaq exchange to save on costs and compliance requirements.
The move comes amid challenges, including the post-pandemic slowdown in online food orders and tough competition. Recently, Just Eat sold its US arm, Grubhub, at a significant loss after acquiring it during the pandemic boom.
A Just Eat spokesperson emphasized the UK remains a key market, with its network covering 97% of the UK population. However, the decision adds to concerns about the declining appeal of the LSE, particularly after Klarna opted to float in the US. A survey of FTSE 350 companies found many UK business leaders expect continued net delistings from the LSE over the next five years.
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Thursday
Euro zone bank lending continues to pick up, ECB data shows
Lending to euro zone companies and households continued to accelerate last month, supporting the arguments from some that the bloc's economy has bottomed out and a "soft landing" was underway, European Central Bank data showed on Thursday.
Lending growth to businesses picked up to 1.2% in October from 1.1% in September and was at its best level since mid-2023. Growth in lending to households meanwhile rose to 0.8% from 0.7% a month earlier.
The M3 measure of money supply, sometimes an indicator of future economic growth, expanded by 3.4%, a level last topped in December 2022, and came in line with expectations in a Reuters poll.
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Friday
Non-banks are underprepared for times of crisis, BOE warns
The Bank of England (BoE) has warned that non-bank financial institutions (NBFIs) may be "underprepared" for market stress, highlighting vulnerabilities in the sprawling sector. Following a year-long global initiative called the System Wide Exploratory Scenario (SWES), the BoE examined how banks, hedge funds, asset managers, and pension providers might react to a sharp financial market shock. The results underscore risks in repo financing markets and the sterling corporate bond market.
Key findings:
The BoE stressed the need for:
While stress tests of UK lenders showed they could weather severe scenarios, broader risks persist due to geopolitical tensions, higher interest rates, and global market fragmentation. The Financial Stability Report highlighted vulnerabilities in asset valuations and the potential for sharp corrections.
The BoE also announced plans to test UK banks biennially instead of annually, aligning with European practices, and expanded its efforts to manage liquidity in financial systems.
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