Oil rallies on Oman tanker fire

Morning Note

Oil rallied on geopolitical tensions in the Middle East while equities started to look like they are range-bound ahead of the FOMC meeting.

Oil jumps

Oil has shot up sharply after slumping to 5-month lows overnight. Reports of an oil tanker being on fire in the Sea of Oman rattled markets and sent Brent up $2 in a matter of minute, but await to see whether this will hold or is an algo-based kneejerk that will be faded. We know that geopolitical tensions in the region are worsening and raise supply-side concerns in terms of short-term outages etc – but with OPEC already curbing output and US production at a record high the market is far less susceptible to a shock.

A surprise build in US inventories was to blame for the drop yesterday and ultimately be more important than what’s happened in Oman. EIA figures showed stockpiles climbed by 2.2m barrels, against an expected decline of around 500k. At this time of year we’d normally see stocks decline but they keep moving higher. More supply, not enough demand. This is squeezing longs and we should see further liquidation in speculators’ net long positions, twisting the screw more.

With the demand outlook so clouded there is no sense that the bear market will end any time soon. Massive US supply has changed the rules of the game and there’s not a lot OPEC can do about it. Brent recovered to the $60.50 area having dropped below $60, before it spiked on the Oman news to trade through $62. Risks skewed to downside – it looks like $50 will be seen before $70. However, we’re in a major support zone and the latest dip could be the second trough in a double-bottom reversal.

Equites retreat

Equities pulled back again yesterday – nothing new in terms of trade, just a loss of stamina it seems. SPX encountered important technical resistance and retreated to 2880 on the close. Markets in Europe retreated as the rally ran out of legs.

European shares were on the back foot again on Thursday but then turned green. Bulls may retake control but until the FOMC meeting Wednesday we may expect the major indices to trade in these ranges. Hong Kong again weaker again amid the protests.

US president Donald Trump says China will make a deal. Well we’ve heard all this before. The markets starting to ignore this rubbish. There is precious little signs that we are even close to seeing a deal done at the G-20. Maybe a top-level handshake between Trump and Xi but hard to see much more.

Trump also said he’s still looking at placing sanctions on the planned Nord Stream 2 pipeline. It’s been talked about before but it raises spectre of increased tensions between Germany and US (see euro below softer). The project is controversial enough within the EU and creates the potential for further fracturing among EU states. On this Trump has many European allies. And as the Mexico farrago showed, Trump is not afraid to weaponize trade/tariffs for the pursuit of non-economic policies. We know he wants EU members to stump up for defence.  It’s not a giant leap to see Trump weaponizing trade to achieve this ambition. One can anticipate deterioration in relations.

Tory race

In the UK political space, the Tory leadership first vote takes place today. It’ll sort some the wheat from the chaff but still doesn’t get us to the final two. But there will be implications for who’s going to pick up the votes later on from the candidates that don’t make the first pass.

Sterling had rallied a touch on Boris’s speech – algos in overdrive most likely – before slipping back below $1.27 again as Parliament refused to back Labour’s motion to take over business and take no-deal off the table.

Euro breakout fades

In FX, the euro inched up a touch Thursday after a fairly significant sell off yesterday that will have stressed bulls. The drop in the euro seems to be down to the Trump talk on Nord Stream 2 and the prospect of a worsening in relations with Germany. Last look EURUSD was trying to regain the 1.13 handle. This breakout looks like Monty’s sluggish, meat grinder approach to Caen.

Meanwhile inflation expectations have been crushed – the markets calling out the ECB over stimulus hints and says you can do more but we’re not sure if it will work. Euro 5y5y inflation swaps sunk to record lows- below 1.2% for the first time. The ECB will be forced to do more.

European stocks rebound, euro about to give it up

Forex
Indices
Morning Note

Stocks were lower across the board yesterday as the weight of the US-China trade dispute pushed everything down. From pretty much assuming the US and China would strike a deal, the market is repricing for a prolonged fight.

SPX closed lower by 19 points, or 0.69%, at 2,783, resting close on the 100-day moving average. This was a little off its lows of the day and a shade above the all-important 200-day moving average at 2776. The Dow shipped over 200 points and was briefly below 25k. 

The FTSE is also flirting with the 200-day line having closed 83 points lower at 7185. The pattern looks decidedly bearishy and flaggy right now. Support on the 38% retracement of the bottom-to-top rally from the 2018 low thru Apr high sits at 7150, which we saw tested and rejected yesterday. This was also an area of support that produced a bounce through the third week of May. 

We are seeing a small rebound in Europe on the open but there’s still lots of nervousness out there and the downward pressure is rather powerful and looks hard to resist. Any gains look hard won and easy to give up at the moment.

Forex

Dollar is still bid, pressuring everything else, with the dollar index on the 98 handle as it hoovers up haven demand. The euros is on the brink of capitulation on the 1.11 handle, with the pair last at 1.11343, ready to test those key May lows again, which marked a 2-year trough for the single currency. A breakdown through 1.11 on the downside brings 1.08 back into the picture.

GBPUSD doing very little still, trapped around the 1.2640 region. Whilst we are yet to retest Thursday’s low at 1.2610, we are making progressively lower highs and lower closes – the pound is still under a lot of pressure and this doesn’t look like having much chance of lifting until we know who the next PM will be. Brexit uncertainty remains.

That renewed dollar strength seems to be weighing on gold, which was last back at 1277. Rising trend support appears around the 1270 mark but for now the metal looks caught in a range. 

The GDP second print for Q1 is later – with the market already betting big on a rate cut this year it’s hard to see how a downward revision will really shift things. The first reading showed 3.2% and is expected to be revised down to 3.1%.

Watches of Switzerland

Meanwhile the latest IPO is in London – Watches of Switzerland has priced at the top of its range, at 270p. Shares will start trading today on the open. As we’ve seen this year IPOs can be a rough ride for shareholders and management. Hopefully for the management and buyers it won’t turn out to be another turkey like Aston Martin – one feels the omens are better for this one.

Markets react to European elections

Forex
Indices
Morning Note

European equity markets are on the front foot again, building on yesterday’s gains, as investors breathe a collective sigh of relief following the European parliamentary elections.

European bourses have firmed as it looked like the political centre ground is holding in the EU despite pressure from right and left, whilst we have some upbeat spin on trade to contend with as we hear about a possible US-Japan trade deal. London and Wall Street will be playing catch up today. Futures in the US point to gains today. 

Euro elections: the centre holds, barely

European elections returned gains for a number of right-wing, Eurosceptic parties as expected, but not enough to really shake the ground from under the centrists. The main blocs have held on to remain just about in control, although for the first time they have lost their combined majority.  

The gains for the right continue to point to a problem for Brussels. But there were also big gains for the Greens. The political landscape is shifting, but it wasn’t a Brexit-like earthquake.

The strength of the League in Italy and National Rally in France is noteworthy and will exert domestic pressure more than at a European level. Expect further confrontation between Rome and Brussels. Indeed, on that note, Italian bond yields spiked, with the 10yr BTP above 2.7% again, amid reports the EU is mulling a $4bn fine for Italy for failure to control debt. For France it simply highlights that Macron’s reformist agenda is under a lot of pressure.

The euro though has been pretty well unmoved although London and New York were shut yesterday and we might see traders coming back in today. EURUSD was steady at 1.1180.

Brexit looms over pound

Ain’t no party like a Brexit Party: In the UK the centre has given way completely, and the pressure on the pound remains firm. The Brexit Party won the day, although the overtly Remain parties did very well with the LibDems and Greens enjoying a strong bump in support. European elections are entirely meaningless of course in terms of the Westminster arithmetic, but the impact on the ruling Tory party is key. 

For markets, we should expect the result to impact the leadership race and already a number of leading candidates have upped the no-deal rhetoric. One can only argue that this will, on the margins at least, push candidates more towards the fringes and see the party go more to the right. Given the Tory membership’s pro-Brexit feelings there is an ever-increasing risk of a no-deal exit at this stage. A lot is priced in but a no-deal would see further downside for the pound.

GBPUSD has found support again around 1.2670 and while there is still a lot of pressure, Thursday’s reversal on the 78% Fib retracement on 1.2610 looks to have placed something of a floor under the pound for the time being.  

Bitcoin 

Cryptos have rallied hard again on strong volumes, taking another leg higher over the weekend. Bitcoin is testing the $9k round number resistance, before a tilt at the 38% retracement around $9640 and then the April 2018 high on $10k. Once this market builds up a head of steam, it’s hard to stop. As previously argued, this is a big momentum play and the more buzz the more traders will pile in behind the rising wave. Standing in front of a steamroller springs to mind, if you are a natural bear. Better to wait and let it fizzle out, which it will eventually. The more it rallies, the bigger the blow-up when it comes. However, we should expect some pullbacks and retracements along the way, so watch for those whenever the rally looks overextended – 14-day RSI approaching 90 has been a pretty good indicator in the past. 

Morning Note: China’s long march, Britain’s interminable May

Forex
Indices
Morning Note

Wall St was higher yesterday as markets look on the bright side of the US-China dispute, focusing on the 3-month reprieve for Huawei. But news that the White House may also blacklist Chinese surveillance company Hikvision has weighed on risk appetite again.

It’s not looking too great overall, and we continue to witness Washington push hard in one direction and then beat a tactical retreat to test its opponents. 

The situation we’re in now is a marked deterioration from the start of May. Beijing is now talking about a ‘new long march’, and trade talks have completely broken down. From this point we need to start to consider escalation looks like – tariffs on the $300bn of remaining Chinese exports being discussed would lead to a material impact on the US economy, corporate earnings and inflation. There is a risk that the market is complacent to what may be a very long, drawn out affair, albeit having clearly taken on some of the warnings – SPX closed at 2,864, down 3-4% from the all-time highs. However, this may not yet reflect the downside risks from a full-blown trade conflict. 

Forex

Sterling is on the backfoot again this morning after going through the ringer yesterday. GBPUSD is below 1.27 again, having whipsawed on the prospect of a second referendum.  The government plans to bring the Brexit withdrawal bill again to parliament but it’s clear it lacks the votes to get through. Pressure on the PM is excruciating.

At send time the pair held on 1.2690, having fallen to 1.26844. Support seen around a series of Dec lows at 1.2610, which coincides with the 78% retracement of the top-to-bottom move up from the Jan YTD low to the Mar YTD high. This area could well be a strong line of support. If it goes then we are looking at a potential retreat to 1.24. The pound was also weaker against the euro, with EURGBP continuing its march to 0.88, having notched up its worst losing streak on record versus the single currency. 

Sterling oversold?

But are we set for a pullback? The short sterling trade seems pretty crowded and the 14-day RSI calls for the pound to bounce on both EURGBP and GBPUSD. Sense from the momentum indicators that this decline for sterling against both the euro and dollar is running out of steam – of course that could just mean a temporary pause. We are also quite heavily extended at the respective lower (GBPUSD) and upper (EURGBP) extremes of the Bollinger Bands. Nevertheless, risks still appear skewed to the downside given the complete lack of certainty on the political front. Expect heightened volatility in sterling crosses.  

Mrs May needs to realise her deal is never going to get through Parliament, whatever amount of convoluted bargaining she attempts. Her gamble on offering a confirmatory referendum on her deal has clearly failed at the first hurdle. 

Broad-based dollar strength is also weighing on the pound as the greenback is finding safe haven bid in the current trade climate. The dollar index has just pulled back from the 98 handle but is looking firm. EURUSD has pulled back further to 1.1150 but seems to be building some support around this region. With the massive descending wedge nearing completion – are we set for an upside breakout? We’ve talked before about it being too early to call the top of the dollar rally, but as we look into the second half of the year, that is when many think the dollar will see a retracement. 

Data watch 

Japanese macro data overnight was soft – exports declined for a fifth straight month. We note the big drop in exports to China – down 6.3%, outpacing the overall decline of 2.4%. Core machine orders were down 0.7%, although this was weak, it was better than the 5.5% decline registered a month before. 

On tap later we have the UK CPI figures – 2.2% is the consensus. However, we expect the number to be skewed by the hike in the energy price cap. Core inflation is seen at 1.9%. Whether this is the peak in inflation will depend a lot on Brexit, and whether we see wage growth pick up. The Bank of England will look through any above-target print for a while, at least until Brexit is clearer. 

FOMC minutes on tap too – watch for the markets to find these a little more hawkish than they would like. One gets the sense that the Fed is not quite ready to end its hiking cycle. Again one feels the market is not correctly pricing the chance the Fed will raise rates later in the year – albeit the base case is for it to stand pat until 2020. 

Sell in May and go Huawei: US-China ad nauseum

Forex
Indices
Morning Note

When can we stop talking about the US and China? European stocks called to open higher after a robust session in Asia showed investors are weighing the latest US-China spat over Huawei for what it is. SPX closed down 0.67% yesterday on the broad US-China-Huawei-Google spat, with tech stocks the worst hit. The Nasdaq 100 shipped 126 points to close 1.7% lower. Chip makers were rocked but look set to bounce back today – these rose in after-hours trading and Asian peers were much firmer overnight. 

US-China, Google-Huawei

After blacklisting the Chinese firm, the White House has issued three-month reprieve to allow US companies continue to do business with the group. It’s all rather like the way Trump slaps on tariffs but delays the execution to allow room for negotiation. Whether it’s Huawei or tariffs, I would see all of this in the broader context of giant tug-of-war between the two superpowers being played out in front our eyes. As such, the more this goes on the lower the chance of a meaningful resolution to any of it. Trade disputes ad infinitum, ad nauseum. 

China has vowed to retaliate but stocks in China rose overnight – the more damage the US tries to do the more the market expects stimulus from Beijing.

Brexit continues

We don’t even have a lot on the Brexit front to worry about today. Euro elections are centre stage this week – as noted in yesterday’s FX note, the Brexit Party is set to win in the UK, whilst Eurosceptics and populists of various hue will sweep about a third of the vote across the continent.  Watch therefore for action in EUR and GBP crosses, as well as Italian spreads.  

Economic indicators overnight have been less than stellar. South Korean exports shrunk by nearly 12% in May, having decline more than 8% in April. Singapore’s government has downgraded growth forecasts for 2019. Thailand GDP growth hit a 4-year low. Lots of trade related effects being felt, clearly.

Fed chair Jay Powell spoke yesterday but did not really go into monetary policy. His remarks were focused on financial stability, stressing that ‘business debt does not present the kind of elevated risks to the stability of the financial system that would lead to broad harm … should conditions deteriorate’.  He added though that ‘the level of debt certainly could stress borrowers if the economy weakens’. Move along, nothing to see here. Fed governor Richard Clarida speaks later – will have a lot more on policy and will be closely watched. FOMC minutes are due tomorrow.

Forex – dollar bid

The dollar continues to find bid, with the dollar index touching on 98 again, its strongest since May 3rd. Meanwhile EURUSD has also sunk to its weakest since May 3rd. US 10yr has risen above 2.4% again, having been as low as 2.35% last week. Firmer US yields and the safe haven appeal of the USD in the current trade war situation is keeping the dollar supported.

Yesterday’s emerging three inside up formation on the GBPUSD daily chart fizzled out, with the pound under the cosh still and threatening now to break below 1.27. The 1.2710 region is acting as support for now but the downwards pressure could eventually tell. 

RBA set to cut

The post-election bounce in the Australian dollar proved short-lived as anticipated. AUDUSD was back trading on the 0.68 handle as the RBA gave us a very clear signal it’s ready to cut rates. In fact, this was about as dovish Philip Lowe could be without actually saying ‘I will cut rates in June’.

The June 4th meeting will likely see the central bank move to cut the cash rate to 1.25% from the current 1.5%. The RBA is really tying its policy outlook to the labour market. Unemployment rose to 5.2% in April and the risk is that exposure to China and trade will act as a drag in the coming months. Low inflation currently gives it ample scope to cut rates.

Morning Note: Markets recover but Trump factor remains

Forex
Indices
Morning Note

From a wine dark sea of red to green across the board: US and European equity markets recovered on Tuesday, with the S&P 500 climbing 0.8% as markets recovered from the steep sell-off on Monday. 

The Dow recovered 200 or so points of the 600+ lost on Monday. European futures are looking positive again as markets cement the gains from yesterday. All sector rose as we saw a broad risk-on recovery. The FTSE was up 1% yesterday and is now looking to push on up from the 7240 level to break 7300 again. 

A series of comments and tweets from the President has markets behaving a little more sensibly, but risks still seem skewed to the downside until there is clarity and a ‘deal’. There is obviously still room for the US and China not to raise their tariffs. Mr Trump sought to play down the tariff hikes and talk up the prospect of a deal again.

Trump factor

The problem right now is that this market is trading on the whimsy of Donald Trump all the time, which makes it a tough place to be.  And yesterday’s rally has not wiped out the losses from Monday. One can only say that we should expect more volatility ahead and more shaking of the tree from Donald Trump. Still don’t discount the prospect later in the year of the Fed raising rates – markets are currently betting big on a cut and if a hike came it would be a major shock.

With that in mind, on tap today we have US retail sales figures. The strong PCE print suggests US consumer spending is strong and we may well start to see the retail sales numbers print higher over the next few months. The US consumer is in fine shape and this could drive the dollar north. 

Alibaba results in focus later with Chinese retail sales growth falling to its weakest in 16 years. Sales rose 7.2% in April. Other China data may also weigh – industrial production fell to a relatively meagre 5.4%, well off the 6.5% estimated.

German economy rebounds

Data just out this morning suggests Germany’s economy is showing some resilience – the economy grew by 0.4% in the first three months of the year.  Some relief perhaps but there is still little to get excited about in terms of the Eurozone economy.  

EURUSD is holding just above the 1.12 level – a breach here could bring in 1.1170 and then the early May lows at 1.11350. 

Brexit talks

News on Brexit – the government will table a vote in June with Theresa May apparently clinging on for dear life and a magical Brexit moment. It’s hard to see it panning out the way she would like. Eurosceptics will scupper anything that she can bring to the table (given the EU won’t renegotiate) and Labour won’t help her out. This is going nowhere – odds on General Election and a second referendum are shortening. 

The Brexit noise is putting some pressure again on the pound. GBPUSD has given up the 1.30 handle and was last holding onto 1.29 and below its 200-day moving average. A breach below 1.2860 would be bearish, before then the dips may seem attractive. 

UK GDP could wake sluggish pound, but the outlook is far from rosy

Forex

The UK’s first-quarter GDP print could be a good one, but will everything be as it appears?

Analysts at EY ITEM Club expect an uptick in growth during the months in what should have been the final quarter before the UK began its transition out of the European Union. A frantic few months, several baffling votes, and two extensions later, and the government now has until October to figure it out.

It’s longer than we need, Theresa May boldly claimed, seemingly having forgotten how the last few months have unfolded. Since then the political front has fallen eerily quiet, but the same cannot be said for businesses.

Brexit preparations to inflate growth figures?

If the UK economy did indeed pick up pace at the start of 2019, it could be because companies were busy stockpiling ahead of – what seemed at the time – an almost unavoidable no-deal Brexit.

PMIs for the quarter have made unpleasant reading; March saw the key services index collapse into contraction territory with a 48.9 reading. Construction, meanwhile, recorded the first consecutive output decline since August 2016.

Manufacturing, on the other hand, hit a 13-month high of 55.1 during March. The key phrase from survey-conductors Markit, though, was “The impact of Brexit preparations remained a prominent feature at manufacturers in March. Efforts to build safety stocks led to survey-record increases in inventories of both purchases and finished products”.

It’s even possible that consumers have been stockpiling, and that this will increase growth as well.

How will sluggish pound respond to growth data?

Brexit and the associated political drama have worked to effectively anaesthetise sterling from economic data. Even key data like services PMIs have been met with a muted response of late; until the outcome of the Brexit negotiations is known, the economic calendar for the UK is somewhat moot.

Growth data could be different.

Markets fall quiet ahead of US jobs data, UK seeks longer Brexit extension

Morning Note

Market activity has cooled today as traders across the globe await the latest non-farm payrolls report from the US. Last month’s data showed a severe undershooting of forecasts, with jobs creation clocking in at just 20,000 compared to the 175,000 consensus. But wage growth was solid and unemployment dropped back below 4%, making the headline jobs number easy to dismiss as a blip.


But private American payrolls data from ADP – which traders have often believed serves as an indicator for the NFP result – delivered a big miss this week. Markets are now bracing for another soft jobs number. The Federal Reserve has already paused its plans to continue hiking rates, with the dot plot shifting lower and markets already pricing in odds of a rate cut this year. Another set of dire jobs numbers, combined with pressure from the White House to begin cutting rates straight away, could make it hard for the Fed to avoid committing to a much more dovish policy trajectory.


Just keep an eye on wage growth – a tight labour market should be delivering strong pay increases. A solid performance here could soften the blow of any downside surprise in the jobs numbers, especially as a late-stage economy will naturally struggle to keep adding jobs. A 49-year low for US jobless claims in the previous week also suggested that the labour market remains on good form.

UK prepared to participate in European Parliament elections in exchange for longer Brexit delay

GBP/USD is holding firm just below $1.3100, with traders reluctant to bid sterling higher despite the news that Theresa May has requested another Brexit extension. This time the UK is seeking to push back the official exit date until June 30th. The past week has been a good one for those betting against a no deal exit – cross-party talks and a further delay have both cut the odds of a hard Brexit.


However, there are two reasons not to get too optimistic on sterling.
Firstly, sterling so far has been largely unperturbed by the significant risk of a no deal before this week’s developments, so optimism is largely priced into cable already.


Secondly, May and Corbyn might be able to reach a consensus, but given the leaders’ strenuous relationship with their respective parties, there is still no guarantee that even a joint deal can make it through Parliament.

This delay is unlikely to go down well with Brexiters, especially as it means fielding candidates in the European Parliamentary elections – expect there to be little goodwill in Parliament towards May and her new deal.

Equities hold near highs – NFP overshadows talk of incoming trade deal

Equities are similarly shielded from the latest tailwinds by the proximity of NFP figures. President Donald Trump yesterday stated that a trade deal with China could be concluded within four weeks, with President Xi Jinping calling for talks to conclude earlier.


Global equities are soft for now, but are still on track to close on a solid footing. The STOXX 600 index is on track for its best performance in almost three weeks, while the DAX hasn’t fared this well since December 2016. Gains for the S&P yesterday saw the index notching the first six-day winning streak since February 2018.

Brexit compromise, dire PMIs, a lift for Facebook and a drop for Lyft

Forex
Morning Note

Facebook up on Deutsche Bank Instagram note, Lyft receives first “Sell” rating

Despite the negative news-flow swirling around Facebook as it battles concerns over privacy and extremist content, stock has continued to climb today, registering a 3.3% gain. A new note from Deutsche Bank states analysts believe that Friday’s addition of a Checkout on Instagram feature for the image-sharing platform could bring in revenue of $10 billion by 2021. Facebook is currently trying to move away from its reliance on ads, which currently generate 98% of revenues.

Finding alternative revenue streams is important for the company as it faces pressure to clamp down on who it is allowing to advertise, especially as the platform comes under scrutiny for the role of paid ads during elections and other political events.

At the other end of the spectrum is Lyft, which yesterday closed below $69.00; under its IPO price. The stock has been hit by its first “sell” rating. Michael Ward of Seaport Global has set a target price of $42 per share, claiming the current price represents a “leap of faith” in the willingness of consumers to forgo car ownership in favour of ride-hailing services.
Executives at rival ride-hailer Uber may not be looking forward to their upcoming float as much now. Lyft’s performance could significantly dent the price investors are willing to pay; it seems that holding a company valued at many times earnings and yet to post a profit isn’t quite the golden opportunity many first believed.

Looking at the wider markets, sentiment remains positive after fresh signs that the US and China are nearing a deal to end the months-long trade war between the world’s two largest economies. Recession fears are easing and global stocks climbed to six-month highs, while a move out of safety pushed the German ten-year yield back above 0%.

Asian shares hit a fresh seven-month-high, with the Hang Seng up 0.9% to break above the 30,000.00 handle before consolidating around 29,950.00, and the Nikkei 225 up 1.3% to flirt with 21,800.00.

European shares are also higher; the DAX has registered a 1% gain. Signs that the UK government may be moving towards a softer Brexit have helped nudge the FTSE up nearly 60 points; resistance remains around 7,400.00.

Cable caught between Brexit compromise and service sector stumble

Having exhausted all other Brexit options, Theresa May last night announced that the UK needed another short Article 50 extension, and extended an offer of talks to Labour leader Jeremy Corbyn. May still doesn’t want the UK to take part in European Elections, but wants to avoid a no-deal Brexit; currently scheduled for April 12th.

It marks a significant change in strategy, and cable responded positively. Sterling was up 0.5% against the dollar this morning, but gains were trimmed following a dire reading from the March services PMI. Analysts expected the reading to drop from 51.3 in February to 50.9, but the sector instead recorded a contractionary 48.9.

Taken together, the PMIs are waving a red flag for the UK economy. Only the manufacturing sector continues growing, and that is because of companies stockpiling ahead of Brexit.

The uncertainty facing businesses is an anchor on the UK economy, but can May and Corbyn craft a deal between them that appeases Parliament? The move certainly signals the Prime Minister is ready to consider a softer Brexit, but will anyone buy it?

During normal times, a consensus between Conservative and Labour leaders would have a strong chance of uniting the house. But we have to remember the circumstances and the leaders in question. Tories aren’t likely to vote for anything with Corbyn’s fingerprints on, while the Labour party isn’t exactly Corbyn’s biggest fan either.

Cable remains higher – a deal that potentially avoids further economic damage is clearly better than no deal that threatens even more (so markets believe). A soft patch for the economy can be overlooked if things get cleared up quickly, and hope this is the case has kept GBP/USD supported around $1.3175.

Market Commentary – More Brexit Deadlock

Forex
Morning Note

Brexit deadlock as Parliament plays the fool on April 1st

It reads like an April Fool’s story, but it’s unfortunately true; while a bunch of semi-naked climate change protesters demonstrated in the viewing gallery (allegedly even supergluing themselves to the windows), MPs voted against all four Brexit alternatives in another round of indicative votes. 

It’s now just ten days to go until the UK is set to leave the European Union with no deal in place. The EU has been doing its best to act nonchalant, but chief negotiator Michel Barnier stated that a long extension was possible, given enough justification. A sign of jitters from Europe, or simply another attempt to make sure the EU doesn’t get the blame for the UK’s misfortune? 

Not only are the odds of a no deal exit significant, but chances of a general election are also sizeable. Labour has already stated that it is on election footing, and it’s hard to see how the current government could negotiate anything after Brexit even if Theresa May’s Withdrawal Agreement miraculously scrapes a majority during a likely fourth vote. 

Cable has slipped on the latest results but has already cut losses in half since the morning session began, rejecting the $1.3020 handle and climbing back towards $1.3050. Such a small move suggests markets are still yet to price in the high chance of a no deal; traders are holding out hope that the UK will somehow blunder its way into a longer Article 50 extension. 

In this respect cable is somewhat akin to a cartoon character that has run off a cliff, yet continues to go straight until it eventually realises it has run out of ground. The gravity of the situation will hit at some point, leaving a big potential downside for GBP/USD unless the government can magic an almighty rabbit out of its incredibly empty hat. 

Fourth day of gains for FTSE 100 

The UK’s blue-chip index has risen for four consecutive sessions now, with oil companies pushing the index higher, helped by sterling weakness. Shell and BP are leading the index higher after yesterday’s Chinese manufacturing data pushed crude prices higher; unexpected growth in the Asian superpower has softened fears of a global slowdown. Shell is 0.6% higher, while BP has ticked up 0.5%. 

Other strong movers include HSBC (0.8%), spirits-maker Diageo (0.8%) and Unilever (0.9%). On the other end of the scale is Rolls-Royce, which has dropped 2% after premature blade deterioration was found on two Boeing 787-10 jets equipped with the company’s Trent 1000 TEN engines; Singapore Airlines has grounded the planes. 

Elsewhere global indices are softer after yesterday’s strong gains, with Asian stocks consolidating a seven-month high. European stocks are edging lower. 

Cryptocurrency rally sends bitcoin rocketing above $5,000 

The crypto market has raced higher this morning, with bitcoin on track for its biggest one-day gain in a year after breaching $5,000 – a level not seen since November 2018. The 25% gains were quickly trimmed, but BTC remains up 15% at around $4,765.00. 

Other major cryptos are enjoying strong gains as well; litecoin is 13% higher, bitcoin cash up 10%, ethereum 9% higher, and ripple up 8%. Crypto fans are celebrating the beginning of the long-prophesied bull market, but such jubilance is premature. Technical indicators suggest caution, with the RSI for BTC trending around 90 – anything above 70 is considered overbought. 

The rally added $17 billion to the value of the crypto market in under an hour, but traders are struggling to identify the cause of the uptrend. 

CySEC (EU)

  • Client’s funds are kept in segregated bank accounts
  • FSCS Investor Compensation up to EUR20,000
  • Negative Balance Protection

Products

  • CFD
  • Share Dealing
  • Strategy Builder

Markets.com, operated by Safecap Investments Limited (“Safecap”) Regulated by CySEC under licence no. 092/08 and FSCA under licence no. 43906.

FSC (GLOBAL)

  • Clients’ funds kept in segregated bank accounts
  • Electronic Verification
  • Negative Balance Protection

Products

  • CFD
  • Strategy Builder

Markets.com, operated by TradeTech Markets (BVI) Limited (“TTMBVI”) Regulated by the BVI Financial Services Commission (‘FSC’) under licence no. SIBA/L/14/1067.

FCA (UK)

  • Client’s funds are kept in segregated bank accounts
  • FSCS Investor Compensation up to GBP85,000
    *depending on criteria and eligibility
  • Negative Balance Protection

Products

  • CFD
  • Spread Bets
  • Strategy Builder

Markets.com operated by TradeTech Alpha Limited (“TTA”) Regulated by the Financial Conduct Authority (“FCA”) under licence number 607305.

ASIC (AU)

  • Clients’ funds kept in segregated bank accounts
  • Electronic Verification
  • Negative Balance Protection

Products

  • CFD

Markets.com, operated by Tradetech Markets (Australia) Pty Limited (‘TTMAU”) Holds Australian Financial Services Licence no. 424008 and is regulated in the provision of financial services by the Australian Securities and Investments Commission (“ASIC”).

FSCA (ZA)

  • Clients’ funds kept in segregated bank accounts
  • Negative Balance Protection

Products

  • CFD
  • Strategy Builder

Markets.com, operated by TradeTech Markets (South Africa) (Pty) Limited (“TTMSA”) Regulated by Financial Sector Conduct Authority (‘FSCA’) under the licence no. 46860.

Selecting one of these regulators will display the corresponding information across the entire website. If you would like to display information for a different regulator, please select it. For more information click here.

Marketsi
An individual approach to investing.

Whether you’re investing for the long-term, medium-term or even short-term, Marketsi puts you in control. You can take a traditional approach or be creative with our innovative Investment Strategy Builder tool, our industry-leading platform and personalised, VIP service will help you make the most of the global markets without the need for intermediaries.

Share Dealing in the Markets Group is only offered by Safecap Investments Limited regulated by CySEC under license number 092/08. We are now re-directing you to Safecap’s website.

Redirect
        /var/www/html/markets.com/wp-content/themes/markets/cfd-urls_14.json