Market News & Analysis

Top Story

4 factors impacting the market on Wednesday:

1. Stocks Rally On Trade News

The Dax performed an impressive turnaround after a report on Bloomberg said that Trump was prepared to push back the decision on imposing tariffs on EU auto imports for 6 months. This was music to the ears of German car makers which shot higher, boosting the Dax. The euro also advance on the news (and weak US retail sales), which briefly overshadowed signs of trouble brewing in Italy. 

2. Italy heading for another showdown with EC?


Concerns of a renewed showdown between Italy and the European Union are unnerving investors. Italian bonds and stocks fell southwards a day after Italian Deputy Prime Minister Matteo Salvani stoked tensions by saying that he would be prepared to see the deficit rise above the EU’s limits if employment levels improved. His comments come after last year’s confrontation between Italy and the European Commission and as recent EC reports indicate that Italy’s deficit will exceed the 3% limit in 2020. The Italian deficit is a sensitive subject for euro and FTSE MIB traders. With European Parliamentary elections just around the corner, the overriding concern here is that a strong performance by populists in the European elections could embolden Salvani’s defiance further.

3. Wall Street reverses early losses from weak retail sales

Wall Street kicked off the session on the back foot following weaker than forecast retail sales data. Data showed that retail sales unexpectedly declined month on month in April. Sales fell -0.2%, against a 0.2% increase forecast. However, the market was quick to move past the disappointment as sentiment improved on trade deal optimism. Investors will continue watching trade talk headlines for clues as to where this is heading. 

4. Pound tumbles As 4th Brexit Vote Set For June

The pound fell below $1.2900 to a three-month low on Wednesday as Brexit concerns intensified. As the worst performing currency among its peers, investors are quickly losing confidence over whether Brexit will get resolved. Theresa May is due to put her deal before Parliament for a fourth attempt at the beginning of June, however, the fall in the pound indicates that investors are unconvinced that she will push it through. With Labour saying that they won’t support the bill, the odds are looking slim at best of ministers approving Theresa May’s deal. Sterling dropped to resistance at $1.2860. Losses over the past 5 days have exceeded 1.2%.


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.