Wall Street staged an impressive recovery overnight. The Dow pulled itself back from 500-point losses to close 34 points higher, while the S&P and the Nasdaq closed 0.2% and 0.7% higher respectively.
Apple (NASDAQ:AAPL) led the turnaround, recovering from a sell off after a Chinese court decided to ban sales of most iPhone models by granting an injunction request by Qualcomm (NASDAQ:QCOM). Apple will appeal the decision and for the time being all models are still available in China. This incident reflects how technology remains a core issue between China and the US despite the ongoing trade talks. Technology and trust are key to the discussion between the two powers and are issues that have surfaced several times this week and last with the arrest of Huawei’s CFO and now with the injunction against Apple.
The US market recovered in an erratic session overnight, which reflects just how jittery traders still are. The slightest hint of bad news is resulting in an overdone sell off. The upside reversal that we saw is a bullish sign, even in the short term and is boosting European futures. However, this is unlikely to be sufficient to breakout of any longer-term downward trend.
Brexit Uncertainty Slams the Pound
Brexit concerns weighed on the markets across the globe in the previous session. Theresa May pulling the Parliamentary vote on the Brexit deal sent the pound crashing 1.3% versus the dollar. Following one of the most volatile sessions in years, the pair crashed to a 20-month low of $1.2510. Until traders have any sense of what will happen with Brexit, they will remain extremely nervous. Whilst the possibility of a hard Brexit remains very real, this combined with the increasing political uncertainty is turning out be a lethal mix for the pound.
Theresa May will head back to Brussels in an attempt to renegotiate the Irish backstop with the EU, who have made it very clear that there is no more room for negotiation. The UK ministers break for Christmas on 20th December. Investors will be watching carefully to see whether she can pull something out of the bag by then, or whether this was a tactic to scare Parliament with the market’s reaction. Either way, uncertainty will keep the pound under significant pressure for the time being.
Brexit Adds To Global Growth Fears
The FTSE 250, which has less internationally focused stocks than the FTSE 100, fell 2% in the previous session. The FTSE 100, closed 0.8% lower, faring better than its European counterparts as a weaker pound is beneficial for the international firms on the index. However, problems regarding Brexit are also adding to global growth fears that have been preoccupying the market lately. Today we are looking a move higher in global equities but this is more of a pause in selling than determined buying.
Opening calls
FTSE to open 55 point higher at 6776
DAX to open 91 points higher at 10713
CAC to open 41 points higherr at 4783