Calmer mood after weekend break
Calmer winds were blowing across markets on Monday after last week’s typhoon. The calm in European share markets follows a less volatile session in Asia. The weekend break seems to have calmed minds after an emotional roller coaster of high volatility. There has been a cross-asset rebound off the lows with stocks, crude oil and currencies like the pound and euro all seeing gains. Still, investors will be aware the calm probably won’t last. A lack of clear catalysts from the earnings or economic calendar on Monday could be a mixed blessing if a bout of irrational selling returns.
Smooth credit markets and North Korea help
For the moment, equity investors appear to be taking heart from the fact that credit markets held up relatively well during the sell-off. Credit spreads have widened but not enough to suggest a collapse in confidence. This would imply the weakness last week was equity-centric and related more to volatility and valuations than it is to a wider fear over the economy. On the margins, signs of easing geopolitical tensions between North and South Korea during the Winter Olympics is one less reason for fear/volatility.
UK shares gain as Crypto-mining malware attacks
Shares in the UK gained ground on Monday as overall risk sentiment improved. The optimism came despite a fall in sales at gold miner Acacia (LON:ACAA) mining and despite signs of economic fragility after the British Retail Consortium reported January saw the worst decline in footfall in 5 years. News over the weekend showed UK government sites were hit by crypto-mining malware. Even if the overall bull market is in doubt, crypto-mining malware is another reason that long-term demand should support the shares of companies providing security software and services.
Barclays (LON:BARC) charged again will not matter again
Shares of Barclays rose with investors clearly unfazed by the bank getting charged by Serious Fraud Office over its 2008 capital raise from Qatar. History shows these kinds of charges are more a boon for lawyers than any serious threat to a bank’s ability to do business.
Muted reaction to Tesco’s budget brand plans
Tesco (LON:TSCO) shares were up modestly in early trading in a muted reaction to unconfirmed reports the supermarket plans to create its own budget brand to rival Aldi and Lidl. For us, it doesn’t make sense to create a new budget brands when Tesco ‘own brands’ are already established. The resources required setting up and marketing a new brand could more effectively be spent cutting prices to better compete.
Wall Street awaiting White House spending plans
Futures are pointing to a higher open on Wall Street ahead of the release of new spending proposals from the Trump White House. Money for US defence and the much-hyped $1.5trn infrastructure plan will be another test for attitudes in markets. Wall Street can either focus on the growth or the deficit implications of any shiny new bridges and airports.
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