Global stock markets recovered from the latest escalation in trade tensions between the US and China yesterday as a slight reprieve for Huawie from the US government led to investors buying into the dip. US indices finished the day well with the Nasdaq up over 1% and the S&P and Dow not far behind. The dollar continued to grind back higher but did suffer some volatility as Sterling moved sharply on new Brexit updates – hopes of a second referendum driving it higher before the reality of getting anything done on this subject drove it back down as quickly. Commodities remained in relatively familiar ranges with Oil drifting off and Gold once again looking weak under 1280.
The stock markets are becoming more resilient to global trade concerns as the latest round of fear and recovery has showed us. Currency plays however seem to indicate further caution may warranted with risk trades under pressure. Warning signs in the Yuan, Aussie and Kiwi are all clear as they struggle to rally at all and sit vulnerably near yearly lows, only time will tell if equity players are seeing more silver lining than storm cloud in the current environment and whether they should have followed the lead from their FX counterparts.
Theresa May seems to want to go down fighting all the way on Brexit as she made yet another offer to parliament in an attempt to break the long running impasse between parties. Yesterday she pledged to put her deal to second referendum if parliament approved it and initial optimism was quickly dispelled as both of the parties that she is trying to appease pushed back at the idea. We now look set for further political instability in the UK which could bring the possibility of a hard Brexit back to the fore and both scenarios will be likely see and increase in volatility and put more pressure on the pound.
Looking ahead at todays trading sessions and we’re looking at a relatively quiet Asian session ahead, NZ retail sales has already been released and a slightly better print has done little to influence markets. The London session see’s the release of the latest CPI data but once again expect Brexit considerations to continue to dominate sterling direction unless we see something well outside the 2.2% yoy expected print. On the New York open, focus will swing to Canada with the latest Retails Sales numbers and then it’s a long wait until the main order of the day, the latest FOMC Meeting Minutes.