Breaking News
Get 40% Off 0
👀 Reveal Warren Buffett's stock picks that are beating the S&P 500 by +174.3% Get 40% Off

UK Political Uncertainty Continues To Spook Traders

By CMC Markets (David Madden)Stock MarketsJun 12, 2017 16:14
uk.investing.com/analysis/uk-political-uncertainty-continues-to-spook-traders-200194527
UK Political Uncertainty Continues To Spook Traders
By CMC Markets (David Madden)   |  Jun 12, 2017 16:14
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
IFXGn
-0.23%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DXY
+0.14%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
GOOG
+0.54%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
META
+1.05%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
CL
-0.66%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
LCO
-0.52%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Europe

The FTSE 100 is still in negative territory but the market has managed to pullback most of the losses it incurred in the morning session. The move has more to do with a weaker pound than a sudden change in optimism regarding the British economy. The hung parliament outcome from the general election is still hanging over the London market, and will continue to do so until investors have some clarity about the UK’s political future.

The Conservatives will meet with the Democratic Unionist Party (DUP) tomorrow to discuss the possibility of forming a minority government with the supply and confidence of the Northern Irish party. The DUP are in favour of the UK leaving the EU, but they are against a hard border with the Republic of Ireland, and there is increased talk of a soft Brexit.

Despite the apparent political stability in France, the CAC is down roughly 1% as the technology sell-off that started in the US on Friday night has spilled into continental Europe. The DAX is also well in the red, and stocks like Infineon Technologies (DE:IFXGn), SAP (DE:SAPG)and Siemens (DE:SIEGn) are leading the move lower.

US

US equities are lower on the day, as the Dow Jones, S&P 500 and the Nasdaq 100 are all in negative territory. Last week, Goldman Sachs (NYSE:GS) warned there is a ‘valuation bubble’ when it comes to the heavy weights of the technology sector like Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) and Google’s owner Alphabet (NASDAQ:GOOGL). The Wall Street bank cautioned traders that too much growth was coming from a handful of major stocks and that investors were too narrow in their focus when investing in the tech sector.

The timing of the report coincided with US indices hitting all-time highs and it gave traders a perfect excuse to lock in their profits. The upward move we have witnessed in some tech stocks has been enormous, so some sort of correction was in the pipeline.

Today, traders are buying traditional blue-chip stocks like General Electric (NYSE:GE), Exxon (NYSE:XOM) and Chevron (NYSE:CVX). John Flannery is to replace Jeff Immelt as the CEO of General Electric, Mr Flannery is the CEO of the company’s healthcare division.

FX

The GBP/USD already started the week off on a negative note due to the hung parliament, and now the delay to the Queen’s speech has only made things worse for the currency pair. Traders despise uncertainty and that is exactly what we have got because of the outcome from Thursday’s general election. By delaying the Queen’s speech, the UK is sending out a message of instability, when it badly needs clarity. Dealers will be determined to avoid the pound until they are given some positive news about Theresa May’s government. Mrs May is hoping to cut a deal with the DUP but the Northern Irish politicians are notorious for driving hard bargains so it won’t be done and dusted quickly.

The EUR/USD has managed to give up most of the gains it made overnight due to a general strengthening of the US dollar. The indications that Emmanuel Macron is set for a major victory in the French elections boosted the single currency, but as traders are focusing on the Federal Reserve meeting on Wednesday, they don’t want to be short the greenback going into it. The probability of an interest rate hike from the US on Friday is high, but traders will be paying close attention to the language used at the press conference to try and figure out what the Fed’s next move will be. The economic indicators for the US over the past couple of months haven’t been overly impressive, so one wonders what the Fed’s outlook for the rest of the year will be.

Commodities

Gold continues to be choppy as the decline in equities is helping the metal, but traders are also aware of the Fed meeting during the week. The drop in technology stocks that begun on Friday is still continuing, and investors are using this an excuse to buy into gold. Dealers are shrugging off the rise in the US dollar and are keen to adopt a risk-off strategy, at least in the short-term. The interest rate decision by the US central bank on Wednesday may alter investor’s outlook on gold as it draws nearer.

WTI and Brent crude oil are higher on the day as the energy bounces back after 2 weeks of decline. Short covering for positions that have been taken out in the wake of the OPEC meeting and the surge in US inventories has outstripped the increase in the US dollar, and the jump in active rig count in the US. On Friday, the number of active rigs in the US rose by 8 to 741, the number has risen for 21 weeks in a row, which is a record. Whenever the short covering is completed, we could see a resumption of wider downtrend.

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

Original post

UK Political Uncertainty Continues To Spook Traders
 

Related Articles

Ben Laidler
Leap days matter, a little By Ben Laidler - Feb 29, 2024

LEAP: February 29th is a rare ‘leap day’. This is the extra day we receive once every four years to realign with the solar calendar. It existed in the Roman Julian calendar and was...

UK Political Uncertainty Continues To Spook Traders

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email