Financial market research and analysis

Wall Street closed in the red and Asian markets traded broadly lower as developed-market bond yields continued to fall overnight. US 10-year treasury yields hit a fresh 15 month low, whilst Australian bond yields spiralled to a record low and Japanese bond yields are at levels not seen since 2016. The rapid and persistent decline in bond yields is unnerving investors about the economic outlook. Stocks have managed to steady, supported by expectations of accommodative policy from central banks and reports of progress in all areas of trade talks. However, details remain elusive and there is still no timetable in place for a deal.

Brexit update: No indications

After declining 0.4% in the previous session, the pound has clawed those losses back in early trade on Thursday. However, the pair remains within a holding pattern as investors await some clue as to how Brexit will proceed. After a night of drama in the Commons, ministers are no closer to agreeing on a path forward. In the indicative votes, none of the eight options presented, including a second referendum, a Norway – style option or No deal won a majority sending plans to leave the EU to a new level of chaos.

The fact that the pound continues to hover around the $1.32 mark shows that despite the bedlam, pound traders are still confident that a no deal Brexit will be avoided in two weeks’ time.

Theresa May’s offering to leave her position earlier than intended, should her deal be agreed on in Parliament appears to have been in vain. Members of the pro-Brexit European Research Group (ERG) have decided to back May. However, the DUP still insist that they are not willing to vote in favour of her deal. Speaker Bercow could once again try to prevent Theresa May bringing her deal back for a third vote in Parliament if it isn't sufficiently changed.

Oil slips lower

Crude oil fell away from $60 after data showed an unexpected increase in US inventories. The EIA reported an increase of 2.8 million barrels, a significant rise from the 1.2 million barrel decline expected. Disappointed oil bulls had been optimistic for three consecutive weeks of draws. We expect today’s pull back to be more of a glitch rather than a more serious reversal. Oil remains well supported at these levels by continued OPEC output cuts and sanctions on Iran and Venezuela. Demand concerns stemming from slowing global growth are taking a back seat.

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