Markets were steady on Monday with no sign yet of a resumption of last week’s dip-buying in stocks. Anecdotally, traders appear to be waiting for FOMC minutes and the US unemployment report to test the conviction of Fed members signalling 3-4 hikes this year.
Aside from a spurious social media-based poll reported in Russian media over the weekend putting Francois Fillon ahead, French election polling has been devoid of upset and isn’t causing much concern for markets. Still, we know from the Brexit and Trump pattern, markets only really start paying attention to important elections the week before.
The pound and UK stocks fell in unison on Monday after the EU figuratively scrunched up Theresa May’s Article 50 letter and lobbed it into the bin over her demand for tandem trade and exit talks.
Stocks
Early gains slipped away by the afternoon following some disappointing manufacturing data and reports of deadly explosions on the St Petersburg subway.
Germany DAX was the exception to the rule of lacklustre trading in Europe, coming within a whisker of its all-time high. The German indexseems to have gained a new lease of life since Angela Merkel’s party had its run-away election victory in the state of Saarland. Political stability in Europe passed its first test following the Dutch election, making European shareslook relatively more attractive than Dow Jones USpeers.
Shares of Burberry Group PLC (LON:BRBY) led the FTSE 100 higher on news it would license its cosmetics business to Coty. It’s not exactly a flagship deal for Burberry in itself but could be a gateway to a new revenue model.
Licensing cosmetics out to Coty allows Burberry to monetise the cachet of its brand without the overheads.
Imagination Technologies Group (LON:IMG) comfortably took the bottom spot in the FTSE 250. Investors gutted Imagination shares when Apple (NASDAQ:AAPL) failed to renew its partnership.
Currencies
Threat of a diplomatic spat between UK and Spain over the post-Brexit future of Gibraltar damaged sentiment towards the pound. Disappointing UK manufacturing data for March added to Sterling’s woes.
Gibraltar is the perfect example of the deep ties between the UK and the EU. Presumably a diplomatic solution can reached without war between the UK and Spain but this demonstrates the kind of curve ball the negotiations will throw up. The GBP/EUR fell against the euro and the dollar on Monday with GBPUSD dropping back below 1.25.
European economic data was a mixed bag leaving the eurodown against the buck but up against the pound. Italian unemployment unexpectedly fell to 11.5% with youth unemployment falling to the lowest since August 2012.
Commodities
Oil broke out of its short term double bottom pattern after supportive comments from OPEC Secretary-General Barkindo. Barkindo seeing oil stockpiles coming down reaffirms the belief behind the big pickup in oil prices last week. High compliance with existing output cuts and some members of OPEC calling for an extension contributed to the biggest weekly gain for Brent crude this year last week.
Gold was caught in the crossfire of some demand for a haven after the Russian subway explosions and strength in the dollar after strong manufacturing data. Precious metals have eased back from a strong rebound off the lows on Friday.