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FTSE rallies after fails to steer a clear course on Brexit

A day after an open set of votes in Parliament failed to produce a resolution to the Brexit deadlock, markets remain slightly adrift. Banks and financial firms came under pressure this morning but the FTSE still managed to head higher after a lukewarm opening. The pound, which is the better gauge of how the markets perceive Brexit, is losing ground against the dollar and the euro but, more importantly, sterling volatility is rising to the highest level since the 2016 Referendum.

China trade progress may slow Wall Street decline

Other European indexes are also making progress this morning despite a lower close across US indices as Wall Street grapples with the domestic US economic slowdown. The US-China trade talks seem to have made some palpable progress on contentious issues of technology transfer and the limitations on US companies operating in China; this is raising hopes that the eventual resolution of the dispute will go some way to alleviate the drag effect of slowing global growth.

US bond yields on an upward trajectory

The Fed’s recent rate hike turnaround is continuing to create demand for US bonds and suppress yields on government debt, pushing the yields on 10-year US government paper below the level of 3-month yields. This kind of inversion in the yield curve tends to be the harbinger of recession, signalling the start of an economic decline within the next one to two years. The last time yields were inverted in such a way was in 2007 before the start of the 2008 financial crisis.
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