Europe
It’s been a positive day for European markets with the political theatre of the triggering of Article 50, by the UK taking up most of the headlines.
As a piece of symbolism the picture of the UK’s EU Ambassador Tim Barrow handing over the official notification of the UK’s intention to leave the EU over to EU Council President Donald Tusk is a powerful one, but in terms of the effects on financial markets today its impact has been minimal, with the pound coming under some selling pressure, but no more or less than in previous sessions.
The tone of the letter was, as expected, conciliatory in nature, as was the response of Donald Tusk as he stated that the EU would now consider the letter and would in due course draft its response with respect to its negotiating guidelines.
On the bond market front UK gilt yields have slipped back, but so have US yields which suggests that there appears to have been little direct impact on government bond markets from today’s events either.
The DAX has continued to outperform its broader European peers with another two year high bringing it closer to the all-time highs of 12,392 last seen in April 2015.
In one of the worst kept secrets of recent weeks, the European Commission finally put us all out of our misery by confirming that they would block the proposed merger between the London Stock Exchange and Deutsche Boerse (DE:DB1Gn).
While the decision by the LSE to refuse to sell off its Italian bond trading platform has been cited as the reason why the merger fell through, the merger was doomed from the day the UK voted for Brexit and senior management pushed for London to be the bona fide HQ for the newly formed entity, something that was opposed strongly by shareholders in Germany.
Another decent performer has been 3i (LON:III) after being upgraded by Morgan Stanley (NYSE:MS), while the gold and silver miners of Fresnillo (LON:FRES) and Randgold Resources (LON:RRS) have lagged behind.
US
After a strong session yesterday US markets have opened slightly lower and are trading on the mixed side after fairly lukewarm comments from Chicago Fed chief Charles Evans saying that he expected to see at least one to two more rate rises this year, while saying that he expected that some of the recent weak data in the current quarter would be transitory, and would improve in Q2.
The latest new home sales data February would appear to support an improvement, with a 5.5% reversing the decline of 2.8% in January.
FX
Despite widespread predictions of doom and gloom the pound has held up rather well as the first steps in the Article 50 process get under way, as EU President Donald Tusk took possession of the UK’s notification to trigger Article 50 of the Lisbon Treaty.
While the pound has come under pressure against the US dollar, as well as the Australian dollar, it is holding up well against the euro despite an earlier slide, as the latest economic data showed a minor slowdown in UK consumer borrowing habits.
The US dollar has continued to rise after comments from Charles Evans of the Chicago Fed that he favoured one to two rates rises this year, with the euro in particular coming under pressure.
Commodities
Oil prices have continued to edge higher after larger than expected drawdowns in gasoline and distillate inventories, while the outage in Libya helped to support Brent prices.
Gold prices have continued to tread water below the 200 day MA as weaker US yields contrast with today’s firmer performance from the US dollar.
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