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Big Boris election win, trade deal very close

Investors might have two early Christmas presents this week, a phase one trade deal between the US and China and Brexit getting done.

Boris Johnson has won a “historic” victory for the Conservatives Party with one of the biggest victories for the party in decades. It’s a victory for relative stability on Brexit and the British economy. It will likely take some time for Labour to recover from this election. Labour Leader Jeremy Corbyn has said he will not fight the next election as leader, in effect announcing his resignation. The size of the defeat felt by the Labour Party means the kind of radical changes they had in store for the economy are less likely to ever materialise. That will be welcome news for investors who are waiting in the wings for some clarity from British politics about the direction it would take the economy.

It is now almost a foregone conclusion that Boris Johnson’s Brexit deal will be signed off by the end of January. Of course, Brexit is not yet complete. Negotiations over the future relationship with the EU will be tough and will likely go through some turbulent moments. The main point is that there is now an agreed direction of travel for Brexit. There is now a Prime Minister who has a strong mandate from the British people to get Brexit done how he thinks is best.

The British pound jumped 2% in a split second when the exit polls pointed to a huge Conservative majority and has held the gains since the results confirmed it. The big moves in the currency markets build on the already substantive gains for the pound since the election was called. Last night was the knee-jerk speculative response to the election but we think there is more room to the upside for Sterling.

The FTSE 100 looks set to open higher after some volatile trading in overnight futures. The prospect of a better business environment for UK-listed companies is offsetting the devaluation of overseas earnings from a stronger currency. We are expecting pro-cyclical and more domestic shares to dominate the gains on the FTSE 100 today. That might include the likes of banks and homebuilders. As a better reflection of the domestic UK economy, which stands to benefit from greater clarity on Brexit and the economy, the FTSE 250 index looks on course for a record high.

Outside of the UK, sentiment has been rising thanks to newfound optimism that the US can sign a phase one trade deal with China. Wall Street hit record highs in response to a tweet from President Trump. According to US sources, the deal has been agreed on both sides and just needs a sign-off from the US President. The prospect of a deal had seemingly dimmed on reports that the US would only delay new tariffs that are supposed to start this Sunday. If the deal gets official confirmation, then we would expect some extra gains in global markets. Rolling back tariffs in exchange for buying more agricultural products doesn’t fix any of the big trade issues. From a markets standpoint a phase one deal would just improve the chance of a global economic rebound next year.

24-1-2020

Markets cheery and central bankers dreary…
EQUITIES Shares in Europe look set for a strong start to trading on Friday morning. The World Health Organisation not designating the Wuhan coronavirus an international emergency has taken the fear gauge down a few notches. The travel restrictions and cutback… Read more

23-1-2020

Risk aversion back on coronavirus & US-EU Trade. ECB up next
EQUITIES Risk aversion has taken hold across Asian markets with the sad and worrying news of more deaths due to the coronavirus in China. Official reports now indicate nearly 600 cases and Macau has cancelled Lunar New Year celebrations after a second case of… Read more

22-1-2020

DAX record high, Tesla $100B & markets brush off pandemic
EQUITIES Blowout fourth quarter earnings and subscriber growth at Netflix has refocused investors’ attention on market fundamentals. Market sentiment had been impaired by worries about the new coronavirus out of China, which has now spread to the United State… Read more

20-1-2020

Oil prices spike on Libya pipeline closure, Europe to open higher
EQUITIES European shares are set to open higher on Monday in what may be a more muted day of trading with Wall Street closed for Martin Luther King Jr. Day. Trading in Asia was light with US investors on holiday today and Chinese New Year celebrations set to b… Read more

17-1-2020

S&P 500 tops 3,300 as Alphabet reaches $1 trillion
EQUITIES European shares look set to open higher on Friday bolstered by stats showing stable economic growth in China and another record-breaking session on Wall Street that saw the S&P500 top 3,300 for the first time. Mining companies are likely to featur… Read more

16-1-2020

Europe to open higher & Sterling recovers
Shares in Europe and on Wall Street are set for a higher open on Thursday after a positive session in Asia.   Wall Street notched up new records and finished the day higher after the signing of the phase one US China trade deal. That the S&P 500 and Nasdaq… Read more

15-1-2020

Stocks, oil lower as Tariffs stay in place, Persimmon, Goldman Sachs, Saunders, UK CPI
European shares are lower on Wednesday after a down session in Asia while LCG pricing points to a lower start on Wall Street. US Treasury Secretary Steve Mnuchin confirmed that tariffs against China will remain until November, after the US election. The tariff… Read more

14-1-2020

Currency manipulator, China exports, Yuan 5-month high, US bank earnings
European shares are flat on Monday after a mixed session in Asia while LCG pricing points to a lower start on Wall Street. INDICES: US removes China currency manipulator status Wall Street has yet again reached new record highs in the lead-up to the signing… Read more