The UK political scene is moving into uncharted territory this week and is likely to be the focus of financial markets. While there was a relief rally in sterling last week over the revolt of the House of Commons against the minority government of sitting prime minister Boris Johnson, Westminster is now subject to rumours as the government contemplates whether it can ignore legislation passed by an opposition controlled Parliament.
Technically the government is bound to now seek a deal with the EU over Brexit. Technically a hard Brexit should be off the table. But with Johnson threatening to ignore the will of Parliament, which would create a major constitutional crisis, traders can expect sterling to be sailing choppy waters this week.
Sterling has been trending down again as a consequence of the uncertainty, and was at 1.2262 vs the USD this morning.
Royal Dutch Shell (LON:RDSa) rallies after poor August
The FTSE was marginally up this morning at 7316. Leading stocks included Centrica (LON:CNA) and Royal Dutch Shell (LON:RDSa). Shell saw some heavy selling in August and was down over 10% on the month after worse than expected Q2 earnings. Long considered a reliable dividend stock, it may be that the company is now looking cheap for some larger players.
Asian markets broadly up, but Hong Kong bucks trend
Asian markets had a relatively good day on Monday. China’s CSI 300 and the Nikkei were both up as was the Kospi in Korea. Hong Kong’s Hang Seng was sold down again as the territory saw further unrest over the weekend. There are now increasing fears that, with the controversial extradition bill off the table, China may start to lose patience with Hong Kong demonstrators.
Investors to focus on central bank intervention
One broad theme is the prospect of monetary stimulus, which may be propping up some markets today. There are significant fears that the global economy is running out of puff. Asian traders are upbeat about the prospect of central bank intervention in regional economies, and in Europe there is going to be plenty of attention this week on the European Central Bank, which is expected to announce some form of bond buying program on Thursday.
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