Financial market research and analysis

Not even optimism over a Brexit breakthrough was enough to prevent another sell-off on Wall Street overnight. The Dow dropped by triple digits for a fourth day whilst the S&P clocked up its fifth straight losing session. Tech stocks and financials led the charge southwards, with Apple diving over 3% and into bear market territory. The tech darling of Wall Street is unable to shake off persistent concerns over iPhone sales, following a warning by suppliers. Rather than remaining isolated, this is leading investors to question FAANG valuations on a broader level. Financials didn’t need to be told twice that banking deregulation would be reined in and the stocks fell accordingly.

In Asia, Chinese stocks rallied on continued optimism of progress in trade talks between the US and China ahead of the G20 meeting later this month. However, the optimism was not broad-based and Asian markets traded in a mixed fashion across the session. Whilst Asian markets put in a mixed performance, European bourses are taking the lead from the softer closer on Wall Street and are set to open in the red as the price of oil struggles for direction.

Theresa May Braces for Political Backlash

The pound spiked higher versus both the dollar and the euro following the announcement that Theresa May had managed to secure the backing from her Cabinet for the Brexit deal. However, the optimism was short-lived as pound traders quickly refocused on the challenges that lie ahead. The pound closed the previous session lower versus the euro and just 0.08% higher against the dollar.

Theresa May is walking on very dangerous ground, with prospects of a severe political backlash riding high. There were no resignations last night which will have offered some support to the pound. However, the coming days are expected to define whether Theresa May’s innings as Prime Minister are over or not. We expect the pound to remain jittery whilst the prospect of a vote of no confidence remains high.

Even if Theresa May survives the coming onslaught, she still needs to push the deal through Parliament, which will be an immense challenge. So, whilst getting “approval” from her Cabinet is a step in the right direction, there is still a very difficult path to climb before pound traders can relax into a bull run.

UK & US Retail Sales

On the economic calendar today, retail sales from both the UK and the US could grab trader attention. UK retail sales are expected to have increased in October to 3.4% up from 3.2% the month previous. Whether this will be sufficient to distract traders from the all-absorbing political scenes playing out remains to be seen.

US retail sales are forecast to have increased to 0.5%, up from a dismal 0.1%. Despite the strong jobs market and increasing wages, consumers are not spending as would be expected under such favourable financial conditions. Investors will be looking for a strong increase in sales to improve sentiment.