Financial market research and analysis

Record highs in UK and Germany

Markets seem to be enjoying the signs that incumbent governments are set for victory in upcoming elections. A surge in energy company shares helped the UK’s FTSE 100 join the German DAX index in making a fresh record high on Monday. German Chancellor Angela Merkel’s Christian Democrat party had a surprise victory in German regional elections at the weekend. The sense the local election results are giving is that Merkel should be able to clinch another term in power without much of a fight. France was the big populist risk which has passed. French President Macron named Edouard Phillipe as Prime Minister, another graduate of the elite ENA school.

May goes for the jugular

Theresa May is going for the jugular and markets like it. Ahead of the official release of Conservative Party manifesto, the Prime Minister announced plans to expand worker’s rights. Her high approval rating and vote-winning policies give May an opportunity to take Labour seats sitting on small majorities. Investor cheer at a Conservative victory has gotten even louder since Labour’s apparent plans for a ‘Robin Hood tax’ on financial transactions.

FTSE breaks Sterling stranglehold

The FTSE 100 reached another record despite the pound being just shy of its 2017 high. Since the snap election was announced, the negative correlation between the British pound and the FTSE 100 has broken down. If the last two weeks are any guide, investors in UK stocks seem to be looking beyond foreign exchange. After consolidating in a 350-point range for most of the year, the FTSE 100 could be setting the stage for another surge higher. 7500 is the next big round number to overcome.

The Euro is popular again

The euro rose across the board on Monday with EURUSD challenging 1.10. A combination of reduced political risk and a stronger economy in Europe and doubts about Trump in the US has rekindled interest in the euro. Data from the CFTC shows positioning in the futures market turned net bullish for the first time in three years last week.

HACKS hit highs

Cyber security and anti-virus companies were in demand after the Ransomware ‘WannaCry’ ran rampant with out-of-date IT systems. The PureFunds ISE Cyber Security ETF hit 52-week highs on Monday. Microsoft shares opened slightly down because of the bad publicity but the latest Windows updates have patched the problem so arguably the company isn’t really to blame for the hacking.

OPEC extends a warm welcome

Oil gapped higher after Russia and Saudi Arabia announced plans to extend output cuts at this month’s OPEC meeting. The sharp fall in oil prices over the past month meant we had been expecting oil ministers to pre-announce the policy to stave off further price declines. The market is still positioned for higher oil prices but the risk is that OPEC has already lost the trust of investors while US inventories keep rising. An output extension has been widely expected so oil markets remain at risk of another crisis in confidence.

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