Week starts on a softer note
The Federal Reserve’s decision to abandon this year’s rate hikes are still reverberating across the markets with Wall Street bearing the brunt of concerns over the US economy. A broadly lower close in US indexes is being felt in Europe this morning with the FTSE launching the week’s trading on a weaker note.
The rally of a million protestors against Brexit this weekend generated some impressive newspaper front pages but did little for UK markets which remain in a painful limbo. A complete lack of political clarity is not doing much for the pound which is just about flat-lining against the dollar and the euro.
A more serious overnight dip in the pound’s value is now in the rear-view mirror but although technical charts point to a slightly stronger course this week, currency trading will continue to be dominated by the vagaries of Brexit.
Over the weekend the Prime Minister managed to fend off yet another attempt at her removal but equally she doesn’t seem to have managed to bring any new MPs on board to back her Brexit plans. At this rate another “meaningful vote” this week could leave the markets as deflated as they are Monday morning.
The dollar weakens
Sterling is not the only currency under pressure, the dollar is also struggling against a number of currencies and is sliding this morning. Some investors are taking profits off the table after a gain late Friday prompted by the sell off in equities although at a relatively moderate pace. US bond yields have also stabilised and are trading flat on last week.
Asian shares tumble
Asian shares are lower across the board as concerns about the state of the Chinese economy continue to seep into the stock markets. The news flow on US-Sino relations continues to blow hot and cold and the wisest move for investors may be to wait it out until the upcoming Trump-Xi Jinping summit. The latest news flow shows that sticking points between two sides still remain in place, not least China’s refusal to relax restrictions on digital trade.
The Shanghai and Hang Seng indices both ended up down not far off 2%, while the Nikkei tumbled 3%. With both European and American trade depending so heavily on Asia a slowdown in the local industries will add to anxieties in Western markets.
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