Market Sentiment Remains Fragile Ahead of a Busy Week
After a volatile week of trading across the globe, there is still plenty to keep investors on edge this week. The focus will gravitate towards another batch of earnings from the US, including Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB). Concerns over US corporates passing their peak and questions over valuations of the FAANG’s means results will be scrutinised closely. With market sentiment in such a fragile state, any surprises could move the market substantially.
Asian markets struggled to keep in the black, unable to shake off concerns over China’s slowing economic growth. A slew of data over the weekend pointed once again to a cooling in the Chinese economy, whilst disappointing earnings from China’s top liquor maker worsened sentiment further.
Banks in Focus after HSBC impresses
European bourses were pointing to a stronger open, despite the mixed session in Asia. Better than expected results from HSBC will keep banks under the spotlight as trading begins in London. With costs finally under control at the bank, growth is back on the agenda. Shares were up 4.4% in the Asian session, with a jump higher on the open expected for the London listing.
Hammond’s Budget Spend to Lift the Pound?
After heavy losses in the previous week, the pound was managing to hold its ground versus the mighty dollar, whilst moving higher against the euro as trading starts for the new week. Domestic political woes and the ramping up of no deal Brexit plans weighed on the pound last week. This week looks set to be another busy week for pound traders with the UK budget today, consumer confidence data on Wednesday and the BoE rate decision on Thursday. All this set to the backdrop of increasingly pressurised Brexit negotiations.
Today Chancellor Philip Hammond gives his third Budget. This will be the final budget prior to Brexit and comes amid a continued deadlock in negotiations between Britain and Brussels. A steady improvement in public finances will enable Hammond to begin the ending of austerity, after years of public sector cuts. However, we are not expecting to see anything too extreme, which could complicate the picture for the UK government as it struggles to complete a Brexit deal with the EU.
A pledge to increase spending is expected to offer some support to the pound. Hammond’s tax cut for smaller retailers, hammered by online retailers could also give the sector a well needed a lift. However, promises of further spending will come with a warning attached. Should no Brexit deal be achieved over the coming weeks, then the government will need to rewrite its economic strategy and spending plans. Hammond will use this opportunity to urge the Conservative party to unite behind Theresa May’s final push for a Brexit deal.
Opening calls
FTSE to open 10 points higher at 6949
DAX to open 20 points higher at 11220
CAC to open 13 points higher at 4980