Stocks rise across Europe in early trading
European stock markets are picking up this morning, as optimism over the global economy trumps Brexit uncertainty.
In London, the FTSE 100 has gained 20 points, or 0.25%, and there are larger gains in continental bourses.
No sign of Article 50 angst here:
Investors have shaken off their worries about US politics, after Republicans failed to win support for their healthcare changes. Instead, they’re hoping that Donald Trump can deliver his promised tax reforms.
Naeem Aslam of Think Markets says:
We do anticipate that doom gloom of Trump’s health care plan failure is going to fade soon, as it is the tax and infrastructure plan which matters the most. It is highly likely that Mr. Trump is going to check all the T&C before he makes the final run with the bill in the House.
This bill is going to become the centre of attention for the US markets which would drive the trading action.
“Brexit jitters” have returned to the markets this week, says FXTM research analyst Lukman Otunuga.
The Brexit jitters were revived on Tuesday evening with Sterling stumbling into steep losses after British Prime Minister Theresa May signed a letter notifying the EU of Britain’s plan to depart from the European Union.
With the game changing Brexit letter due to be delivered to Brussels on Wednesday afternoon marking a critical turning point and triggering one of the most intricate set of negotiations Britain and the EU have ever been presented, Sterling could be in store for a rocky rollercoaster ride.
It’s only two days since sterling was at a one-month high against the US dollar. No wonder traders joke about ‘playing the Forex’…
Sterling falls as Brexit process begins
The pound has dipped against the US dollar this morning.
Sterling fell as low as $1.2378 in early trading, down over half a cent, adding to the cent it lost yesterday.
That suggests there may be a twinge of Article 50 nervousness in the City (and beyond) this morning, as Theresa May’s formal letter triggering the exit process arrives in Brussels.
Traders will be watching for signals from Westminster, and Brussels, for how the Brexit negotiations will develop.
Sterling is likely to remain vulnerable as these talks get underway, as Neil Wilson of ETX Capital explains:
A truly hard Brexit has not been priced into sterling. We could see it move lower still if negotiations take a sour turn – $1.10 is feasible.
The old hard v soft Brexit debate is once again central to expectations for the pound. Sterling will rise on any indications of a softer Brexit and fall on any signs it’s going to be hard. If we head towards a cliff-edge then it could collapse.
We are likely to see a lot of toing and froing between the various Brexit scenarios. Theresa May has set the UK on course for a hard Brexit – no deal is better than a bad deal – but we can expect this to shift in due course once the EU sets out its stall.
The pound has also dipped against the euro, down 0.5% at $1.1495. Such a small move backs up the theory that the triggering of Article 50 is pretty much ‘priced in’.
Traders in Frankfurt will certainly be thinking about Brexit:
The agenda: UK consumer credit figures
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Unless you’ve been sheltering in a nice dark cave for nine months, you won’t need reminding of the main event today:
We’ll be live-blogging all that in Another Place, as they say in Westminster. And you’d think that the triggering of Article 50, although clearly historic, shouldn’t have a huge impact on the markets. The start of the Brexit process really ought to be priced in.
However, investors can be fickle beasts, so we can’t rule out some volatility today as the months of shadow-boxing come to an end.
Britain’s economy has held up pretty well since last June’s referendum, mainly thanks to consumer spending. So the latest UK consumer credit figures, due at 9.30am, will be pored over for signs that people are cutting back.
At 3pm, new US home sales figures will give an insight into America’s economy, after consumer confidence hit a 16-year high yesterday. That’s followed by new oil inventory stats, which might shift the price of crude.