Financial market research and analysis

Trump and central banks put markets on edge

Controversy over new US immigration rules and central bank angst saw stock markets slide across the board on Monday.

Some travel shares including Intercontinental Hotels Group dropped over fears Donald Trump’s travel bans could impair tourism. The new curbs to migration and asylum left travellers stranded, protestors angry and businesses in Silicon Valley concerned for affected workers.

The new measures in themselves affect few migrant US workers but if it’s the start of a trend of tighter immigration restrictions it’s not good for the availability of talent. Baring a few outspoken tech sector CEOs, most companies will be assuming these measures are to boost security and Trump’s credentials as a President who will be tough on security.

European stocks saw early jitters turn to a sizeable sell-off by the afternoon after a lower open on Wall Street saw the Dow Jones drop back below 20,000.

M&A and soft pound help FTSE outperform

Banks and travel companies led a decline on the FTSE 100 that saw the index come close to unravelling all of its gains in 2017. A drop in the pound and M&A news from Vodafone meant the FTSE outperformed the bigger falls seen in other European indices.

Vodafone was a top riser after it announced it was in talks to merge its Indian division with rival Idea Cellular. Shares of DCC led the blue chip gainers after a broker upgrade. Tesco shares were under pressure over concerns regulators might put a spanner in the works of its proposed takeover of Booker.

Banks under the cosh

The UK government offloading some more of its Lloyds shares, disappointing results from Spain’s Bankia and reports of the ECB requesting plans for dealing with bad loans in Italy are three reasons banks have fallen out of favour.

The UK government now owns less than 5% of Lloyds, which will make the bank much more investable. It just means there is a flood of sell orders which will discourage investors in the short term.

Weak profitability from low interest rates and high provisions for customer compensation from Bankia are probably a sign of things to come this year for Spain’s banking sector. Bankia has given up its attempts to minimize compensation to its mortgage customers who had ‘minimum interest rate clauses’ with the announcement that it will return all the profits received as a result of the clauses.

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