Financial Market Research and Analysis

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FTSE renews record on cheaper pound
The FTSE 100 stocks rallied to a fresh all time high (7261p) for the ninth consecutive session, as the cheaper pound continues enhancing the UK companies’ international revenues, attracting investors to the UK’s big caps, despite the looming Brexit and single market risks.

Mining stocks (+0.77%) have been leading gains in London. The pound extended losses to 1.2112 against the greenback. Selling pressures hint at a further slide towards the mid-term support of 1.2080, before the 1.2000 handle.

The euro-pound rose to 0.8763, the highest level since the US presidential election.


Critical week for Donald Trump and the US markets

The US dollar softened against all of the G10 currencies, except the Sterling. So far, Trump expectations have been very high. It is now time for Donald Trump to actually start delivering. Afraid to be disappointed, traders unwind their USD long positions ahead of Donald Trump’s ‘general news conference’ due on Wednesday. The focus is on Trump’s economic plans that will certainly hint at higher spending, faster growth, lower unemployment and rising inflation in the US.

The Trump-boost is expected to bring the Federal Reserve (Fed) to tighten the US’ monetary policy in order to counterbalance a potential overheating in the economy. If Donald Trump succeeds to cheer up investors at this weeks conference, we could see a fresh rally in the US stocks and the US dollar. Therefore, the upside risks prevail in the US markets.

The S&P 500 and the Dow Jones closed 0.35% and 0.38% lower on Monday, yet there are signs of improved appetite in US futures.

The Dow Jones is expected 21 points firmer at $19908 at the US open, the S&P500 is seen 2 points higher at $2270.


Chinese prices are heating up

The producer inflation in China accelerated by 5.5% year-on-year in December, the highest pace in five years, as the Yuan depreciation translated into higher factory gate prices. The consumer inflation remained at 2.1% y/y, however it could be just a matter of time before higher producer prices are reflected in consumer price inflation.

The Yuan firmed 0.18% against the US dollar on the back of a more hawkish stance from the People’s Bank of China (PBoC). Chinese stocks traded mixed; Hong Kong stocks were in demand on increased appetite from mainland investors. Hang Seng gained 0.52%, while Shanghai’s Composite retreated 0.08%. Airline stocks led gains, as China Southern Airlines rallied 9.89%, Air China gained 5.13%.


Turks need 4 liras to buy a euro

The sell-off in the Turkish lira continues as the parliament votes to pass a bill that would pave the way for a referendum aiming to change the parliamentary regime in Turkey and boost President Recep Tayyip Erdogan’s power at the heart of the government.

The USDTRY extended to 3.7829, the EURTRY traded at 4.0125 for the first time in history. Downside risks prevail as the country is shaken by a serious threat to its parliamentary regime. We stay cautiously away from lira and lira denominated assets and warn that the sell-off could continue despite the deeply oversold market conditions.