Financial Market Research and Analysis

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Sterling sinks, FTSE slides
The UK is watching the pound losing ground on Brexit risks and the rally toward the bottom is certainly not over.

The pound traded below the 1.40 mark against the US dollar for the first time in seven years, the euro-pound surged to 0.78876.The Brexit risks continue weighing on the pound as leading names including Morgan Stanley and Societe Generale call for a possible pound depreciation toward the 1.30 level versus the dollar.

The FTSE is again in bears’ hands. All sectors are trading in the red. Materials and energy stocks lead losses in London given that oil and commodity prices face rising selling pressure. WTI gave back the $2 it gained yesterday as Iran called the Saudi-Russia agreement to freeze production ‘ridiculous’ and Saudi Oil Minister made it clear for everybody: there will be no such thing as a production cut. Hence the possibility of a slide to $25 could be kept on the table.

BHP Billiton is down by another 5.60%, Glencore and Anglo American have already lost more than 5%. Barratt Development saw a bump in its share price after announcing a 35% rise in its first half profits. The rest of the sector enjoys the move enhanced by news that loans for house purchases expanded faster than expected in January (BBA). Persimmon (+1.23%) is the biggest gainer in London followed by London Stock Exchange still benefiting from merger talks with Deutsche Boerse.

Gold, the Swiss Franc and the Yen are in demand as cash flows into safe havens, with risk-off seen for European equities in early trading. Gold is ready to grasp the $1250/60 level.

The yen strengthens no matter how determined the BoJ is to fight back its appreciation. In his Diet Testimony, BoJ’s Kuroda said the bank is ‘ready to ease if market rout hurts economy, that the excessive risk aversion is hurting stocks-USD despite the negative interest rate policy.’ The market gave little attention to his words. The USDJPY is ready to challenge the 110 support.

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