Market Wrap: Pound Looks Volatile as Brexit Progress Stalls
December 5th 2017
Brexit Talks Hit a Wall
Yesterday afternoon, British Prime Minister Theresa May took to the stage alongside European Commission President Jean-Claude Juncker, who announced that, “Despite our best efforts and the significant progress we and our teams have made over the past days, it was not possible to reach a complete agreement today.”
Indeed, it seems that Brexit talks have hit another standstill for now. May had hoped to reach an official agreement on the terms of Britain’s EU withdrawal on Monday, but Northern Ireland’s Democratic Unionist Party (who support May’s Conservative government) would not allow proposals that would have moved Northern Ireland’s customs border to the Irish Sea.
The Pound managed to make some nice gains against the Euro and Dollar on Monday morning, but has been in a bearish pattern since the announcement. Further volatility for the currency is likely in the next few days, with more difficulties in the negotiations expected as the British government tries to get the DUP on side.
Once the Northern Ireland issue is cleared and agreed, this will likely pave the way for the Pound to rebound upwards, but for now it’s highly volatile – a good time to make some quick profits in the investment game!
Data and Markets
Elsewhere on the continent, French and Italian services PMI’s were higher, coming in at 60.4 and 54.7 respectively. Anything above 50 indicates an expansion, so this is good news.
In European stock markets today the FTSE100 leads the top indices, mostly thanks to strong performances for supermarket stocks including Tesco plc (after it was upgraded to a ‘buy’ rating from a ‘sell’ by Goldman Sachs), as well as Morrisons and Sainsbury’s.
In other news for UK stocks, Republican tax reforms may provide a boost for UK businesses, according to a fund manager at Janus Henderson, the investment firm. Laura Foll said, “The difference it makes for UK companies is that a large number, particularly of the FTSE 100, are very international companies.” She added, “Therefore if they have US earnings and their blended tax rate goes down from 35% to 20% – that will be positive for a large number of UK companies.”
In Asia, most indices fell during todays trade, but the TOPIX maintained positive momentum, rising above 1,790 points at the close.
Brent Crude oil prices held steady Tuesday at $62.34 after the week got off to a feeble start, as a global crude glut remains an issue, especially amid signs of rising U.S. production. Recent data shows U.S. drillers added more oil rigs last week, feeding concerns over growing domestic crude production.
In metals, gold and silver prices remained firm, while paladium and copper prices both saw significant falls on lower demand.
Copper underperformed several industrial metals in the first half of 2017, but has been on an uptrend in the second half, up 22% year-to-date – an upsurge that comes thanks to the modernization of energy, according to Gianni Kovacevic, CEO of CopperBank.
Earnings and Corporate News
In earnings today, car-parts retailer AutoZone is set to report quarterly earnings of $9.82 per share on revenues of $2.54 billion.
Amazon’s Australian arm is officially open for business! The website was intended to go live on Black Friday, but a few technical problems got in the way.
Shares in rival Aussie retailers rose somewhat unexpectedly today, while Citi analysts described Amazon’s initial Australian offering as “patchy,” adding in a note to clients: “We expect Amazon will not be disruptive to Australian retailers this Christmas.”
They are probably correct, especially given that online sales in the country account for less than 10% of the $300 billion retail sector.
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