As expected the trading week started with more of the same for investors and little in the way of fresh catalysts to disrupt the recent momentum. Stock markets continued to grind higher and the dollar stayed offered as the market remained cautiously optimistic in the current environment. Chinese and HK markets were probably the stand out bourses on the day, CSI up 2.85% and the Hang Seng up 1.37%, momentum seemed to slow as the day progressed and US indices all finished the day up less than 0.5% which should lead to a much more muted start for Asian traders. Pressure came onto the pound after the PM’s latest proposed vote on Brexit was blocked by the House of Commons speaker. Commodities remained at recent higher levels in line with the rest of the market, WTI now trading above $59/b and Gold around 1303.
Brexit remains a major focus for the market today and investors are monitoring the situation very closely. Currently the March 29 deadline is still live and until we have confirmation of an extension then traders are expecting downside pressure to increase as we get closer to that date and the possibility, albeit slight now, of a no deal Brexit. There are a plethora of combinations and permutations being bandied around the market on Brexit and certainly last nights announcement from the speaker was unexpected in Downing Street as the PM pushed to get hard Brexiters on board with her deal. The feeling at the moment is for an extension of the deadline which would give the PM time to push her deal further with MP’s as well as possibly go back again to the EU with potential adjustments. The EU now seems very keen to assist in helping to get this option through, as the prospect of negotiating a fresh deal with possibly even another Prime Minister further down the line does not appeal to the beleaguered trading block. Many investors have been noting that financial conditions are very different now and the UK could come to the negotiating table further down the line from a stronger position.
Looking ahead to today’s trading and the RBA has released its latest Monetary Policy Meeting Minutes this morning largely in line with market expectation. There is little else of note out today in the Asian session but investor focus will turn to the UK on the European open, not only for any updates on the fluid Brexit situation but also on the release of the latest employment and earnings numbers. The German ZEW Economic Sentiment data is due out swiftly after but once that it out the way the economic calendar is free for the rest of the day. Expect Fed chat to increase during the New York day with the possibility of some profit taking flows hitting the market as we move through the sessions towards tomorrows rate announcement.