Financial market research and analysis

The GBPUSD plunged to 1.2169 on Tuesday, amid UK PM Theresa May’s second defeat on Brexit before the House of Lords. Investors will keep an eye on the pound as Chancellor Hammond will reveal the UK’s budget at 12:30 London time. Hammond is expected to announce higher social spending, combined to higher taxes and limited government debt issuance, to reveal improved public finances and to revise the 2017 GDP target higher. The pound offers against the US dollar are touted at 1.2400/1.2426 (50 and 100-day moving averages respectively). On the downside, breaking the 1.2155 support (minor 76.4% retracement on January recovery), should clear the way for a further slide toward the 1.20 mark.

Against the euro, sellers decidedly fight back pre-0.87.

Cheaper pound couldn’t prevent the FTSE rolling index from shortly trading below the 7300p overnight.

The FTSE 100 stocks opened downbeat in London. Softer commodity prices keep the mining stocks (-0.39%) on the back foot; energy stocks (-0.14%) are also spluttering as the barrel of WTI trades below the $53 level.

Drugmakers display a diverging performance following Donald Trump’s tweet citing ‘I am working on a new system where there will be competition in the Drug Industry. Pricing for the American people will come way down!’

We warn that moves based on Trump’s tweets could be speculative and do not constitute a solid base for medium, long-term investment decisions.

AstraZeneca (+0.70%) opened upbeat after Barclays classified the stock among its top picks, while rating GlaxoSmithKline (-0.36%) equal-weight.

Whether the cheap pound could benefit to UK’s stock prices will depend on the budget announcement and the market’s reaction to a potentially upbeat economic outlook for Britain, even as it is preparing for a bumpy Brexit journey.


US dollar up, US stocks down

The strong dollar remains the major story in the currency markets, as the Federal Reserve (Fed) prepares to increase the Fed funds rate by 25 basis points at its monetary policy meeting next week.

The US stocks extended their downside correction on Tuesday, as the data showed the US trade deficit jumped to a five-year high of $48.5 billion in January from $44.3 billion in December.

The S&P500 stocks retreated for the third consecutive session to $2365.51; the Dow Jones retraced to $20901.26. Investors are losing conviction due to a severe lack of details regarding the Trump policies, while facing a tighter US rate policy at the same time. The Dow Jones is called 44 points lower at 20880 at the US open.


China prints trade deficit first time since 2014

Asia inherited a risk-off market from the US and remained offered throughout the overnight trading session. Nikkei (-0.47%) and Topix (-0.31%) traded in the red, mostly due to the lack of appetite on North Korean threat but also the yen’s reluctance to lose ground against a widely bought US dollar.

Shanghai’s Composite (-0.05%) traded with a clear lack of appetite from investors after China’s trade balance turned unexpectedly negative in February (-60.36 billion Yuan versus 172.50 billion expected & 354.50 billion Yuan printed a month earlier). Imports surged 44.7% in Yuan terms, meaning that the jump in data is partially due to a softer Yuan; exports in Yuan terms fell to 4.2% year-on-year from 15.9% a month earlier and significantly below 14.6% anticipated by analysts.

In US dollar terms, the Chinese exports fell by 1.3% while analysts expected 14% expansion in February.

As such, China’s trade balance turned negative in US dollar terms for the first time in three years.

On a side note, the calendar effect, which is due to a significantly earlier Lunar New Year, is believed to have distorted the January trade terms.

In Hong Kong trading, the picture was greener. Hang Seng (+0.43%) stocks diverged positively, led by Geely Auto (+6%) after the sales rose by 167% on year; energy stocks (+0.79%) and financials (+0.38%) reinforced gains.


Gold approaches critical support

Gold extended losses to $1212, as improved US yields continue pushing investors toward yield bearing products rather than the non-interest bearing gold. Thekey mid-term resistance is eyed at $1210 (major 38.2% retracement on December – February recovery). The 50 and 100-day moving averages stand at $1212 and could give a hand to the Fibonacci support. Clearing $1210 should signal a mid-term bearish reversal and could encourage a further sell-off to $1200, before $1180 (January 27 support).