Market Brief: Approaching the eye of the storm

Currency markets have been dominated by the latest Brexit dramas

Stock market snapshot as of [3/9/2019 7:54 PM]

 

  • Currency markets have been dominated by the latest Brexit dramas which saw the pound plunge to its lowest since early January 2017 against the dollar. Parliament is set to have an emergency debate this evening on whether MPs should be granted control of House of Commons business. This is the first stage of a plan sponsored by the Labour Party to pass a Bill that would prevent Prime Minister Boris Johnson from taking Britain out of the European Union without a deal by 31st October if none has been agreed by then. Johnson has hinted that if such a Bill is passed, he could trigger a general election . A race against time is underway in any case, because Parliament is set to be suspended from early next week, and won’t return before 14th October
  • Some queasy sentiment from UK affairs may have seeped into broader proceedings in Europe and perhaps beyond. Key Continental markets failed to make headway. Still, investors were keeping their feet off the gas following reports of the day before suggesting U.S. and China officials are struggling to agree on a date in September for substantive talks. Suspicions questioning optimism about such talks began to be aired last week
  • As such, key U.S. stock markets, including futures have barely come up for air for the entire global session. The S&P 500 and Nasdaq 100 trade close to their day lows; down 1% a piece at last look

Stocks/sectors on the move

  • Apple leads the U.S. benchmark losers with a near 2% drop, even as the group prepares to launch new products next week, including a new Watch. The best-selling smartwatch became the first Apple product to be hit by U.S. tariffs after Washington’s latest round of hiked duties kicked in over the weekend. Apple is now more sensitised to trade impact due to its huge dependence on the Chinese market, where it manufactures, sources supplies and retails
  • Whilst precise U.S. landfall remains uncertain, there’s no sense Hurricane Dorian will hit major oil production installations as it moves north west after wreaking devastation on parts of the Bahamas; therefore there’s been little pause in the renewed deflation of energy prices in the wake of global economic and trade fears. Heavyweight energy shares continue to anchor the overall market
  • It’s a broad downdraft though, with all but 3 of SPX’s 11 industrial segments trading lower, just now. Industrials, technology and Materials are worse off. Chip shares lead the increasingly beleaguered, trade-sensitive IT sectors. Among semis, groups with the closest ties to China, through supply chains and/or manufacturing bases, fall the most. Broadcom was down 4% a short while ago. Rival game processor makers NVIDIA and AMD lost 2% each. Intel fell 1.3%

FX snapshot as of [3/9/2019 7:49 PM]


FX markets and gold

  • FX is mostly about Brexit, keeping sterling under pressure and threatening to cap the euro’s attempts to break sustainably over $1.10 too
  • The single currency was assisted somewhat by an ISM manufacturing print that dollar buyers appeared to find deeply dissatisfying
  • Elsewhere, the RBA’s surprisingly indecisive turn of phrase when it kept rates on hold overnight was taken as a de facto hawkish signal, enabling the Aussie to advance to a one-week high several hours later
  • A full roster of Federal Reserve speakers ahead of the central bank’s pre-decision quiet period are among key points to watch over the coming days. Bank of England Governor Mark Carney, will also make an appearance on Wednesday, when a Treasury Select Committee hearing might become the venue at which his anticipated policy ahead of Britain’s fevered EU exit becomes a cause célèbre again

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