Soft Brexit?
A report in the Telegraph was responsible for sending the pound higher, after it suggested tht the UK was prepared to tell Brussels that it will stay in the customs union beyond 2021. A potential soft Brexit has lifted the pound 0.4% higher in trading overnight, wiping all of the losses from the previous session. Should the report be confirmed as true then this rally could have a lot further to go, but right now traders are awaiting some form of confirmation.
Whilst European bourses are pointing to a mildly stronger start, the FTSE is expected to lag behind its peers owing to the stronger pound. Full year earnings from Mothercare (LON:MTC) (LON:MTC) will keep attention on the battered high street, whilst Royal Mail (LON:RMG) will also be posting its last full year results under outgoing Moya Greene, expect the focus to be on forward guidance for 2019.
Wall Street Brushes Off Geopolitics and Takes Rising Rates In Its Stride
Wall Street managed a positive close overnight in cautious trade as investors mulled over North Korea’s threats to cancel the planned summit with the US and as traders contemplated a more hawkish Fed. In contrast to trading on Tuesday when high yields dampened demand for stocks; last night’s high yields went hand in hand with a positive close, we suspect, finding support from the stronger than forecast industrial production numbers which signalled that the US economy could be strong enough to sustain the expected faster path of tightening.
What Geopolitics?
The markets shrugged off increasing complications over the North Korea - US summit due to be held 12 June. North Korea threatening to pull out of the summit unless the US stops with the denuclearisation rhetoric had almost no impact on the market or President Trump. When compared to the hot-headed exchanges that we saw between the two leaders last summer, the market appears confident tht progress is being made.
The euro could face an uphill battle again today, after tumbling to a 5-month low on political concerns in Italy. There was a strong focus on the euro and the Italian MIB as rumours circulated that the 5 Star / League could request a huge debt write off from the EU and could also aim to leave the euro. Panic sent the euro to $1.1760 whilst the FTSE MIB closed over 2.3% lower. With the initial knee jerk reaction over, the euro has since regained $1.18, whilst the FTSE MIB is on track for a positive open.
US Sanctions to pull Total from Iran
Oil was trading higher overnight, recovering from losses early in the previous session. Oil climbed over 1% in the previous session, an impressive feat given that EIA data showed US oil exports climbed and that the EIA warned of waning global demand for oil following the recent its price spike. The rise in oil price comes as French oil producer Total (PA:TOTF), the largest foreign investor in Iran’s energy sector, will pull out of Iran unless they can guarantee protection from US penalties. This is a blow to the EU’s plans to keep the nuclear agreement running. Clearly there is no easy solution here and although the US have said waivers can be applied for by companies, the bottom line is they want to hit Iran where it hurts so leniency is unlikely to feature strongly.
Opening calls
FTSE to open 3 points higher at 7737
DAX to open 18 points higher at 13014
CAC to open 11 points higher at 5578