Global indices reclaim ground while Brexit moves to the House of Lords
22 January

Global indices reclaim ground while Brexit moves to the House of Lords

 

Global indices were generally buoyant this morning as markets weigh the possible impact of the potential fresh global pandemic. After yesterday’s reports of China’s coronavirus spreading to other nations like US and Thailand, market concerns were heightened, resulting in a panic selloff. Asian stock markets recovered some ground today as China’s response to a virus outbreak tempered some fears, although Shanghai shares initially slipped amid worries about a hit to domestic demand and tourism. Markets elsewhere advanced, while safe assets such as gold, bonds and the Japanese yen handed back some of Tuesday’s gains. Japan's Nikkei, South Korea's Kospi and Hong Kong's Hang Seng all rose by more than half a percentage point. Australia’s ASX 200 shrugged off worries to hit a fresh record high at 7124.50.

 

The GBP saw renewed weakness as the Brexit legislation continues to be defeated in the House of Lords. Although the Brexit process had previously been smooth at the House of Commons, it has been facing repetitive setbacks at the upper legislative house where the Conservatives do not have a majority. Three changes have been introduced to the legislation on EU citizen rights after Brexit and it is likely that when the bill returns to the House of Commons later in the week, the government would seek to overturn all three. Meanwhile, the UK jobs growth have increased the possibility that the BOE will keep its interest rates unchanged during its meeting on the 30th January. There is still significant uncertainty about the macroeconomic direction over the next few months namely the UK-EU trade negotiations and the fact that more BOE members are voicing their support for future interest rate cuts leading to possible sudden shocks for the GBP.

 

Investor confidence in Germany’s growth outlook rose to the highest in more than four years after easing trade tensions bolstered prospects for industry. The German DAX climbed at the news currently trading at 13578.75. The surge in sentiment follows a report by the Bundesbank indicating manufacturing could bottom out at the start of the year. Meanwhile in Italy, 5-star leader Luigi di Maio will step down following a number of defections and low poll ratings. EuroStoxx 50 has retracted to 3784.6 having traded over 3800 since Friday but recovered from yesterday’s fall as did the French CAC which is currently at 6046.74.

 

Gold gave back some gains to trade at $1,556.54 per ounce as appetite for safe-haven assets decreases. In currencies, the safe-haven yen also eased slightly from the one-week high it touched overnight now floating below 110 against the US dollar. The Chinese yuan eased slightly in the onshore market to 6.9055 per dollar. Brent was down at $63.56 a barrel and U.S. oil fell 0.4% to $58 a barrel. The Euro lost ground against despite the promising data and the Brexit frictions buying 0.8494£ and 1.1091$ but it recovered against the Japanese Yen at 121.96JPY. The swiss franc also lost some of the gains trading at 0.9707 against the US dollar.

 

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