Article / 30 March 2017 at 7:00 GMT

Morning Markets: Steady as she goes after Brexit trigger

Former managing editor, TradingFloor.com / Saxo Bank
Denmark

Morning Markets


Watchlist

  • Eurozone: Business Climate Index (0900 GMT)
  • Germany: Consumer Price Index (1200 GMT)
  • US: Initial Jobless Claims (1230 GMT)

UK prime minister Theresa May said many of the right things Wednesday in her letter to European Council president Donald Tusk that triggered Article 50 and the start of two years of negotiations over divorce from the EU. A cack-handed attempt to tie the deal to security, however, angered many on the EU side and may have set negotiations, already certain to be extremely difficult, on the wrong foot from the outset.

GBPUSD was largely unaffected by the trigger maintaining ground above 1.24 after it had lost some 200 pips earlier in the week. In fact, there was a stronger performance from dollar overall as the reflation theme once again bobbed its head above the surface after looking down and out a few days ago.

USDJPY was close to the 111.0 handle, EURUSD was well below 1.08 and USDCNH was headed back towards 6.88. On the latter, it has been a sobering few days for the Shanghai Composite Index which has fallen for four days in a row to put it back at the 3,200 area.

The positive tone continues to be fed by strong macro data and a surge in oil prices after a weaker-than-expected inventory report Wednesday helped propel WTI back towards $50/barrel. Brent crude was around the $52.50/b zone in the run up to the European open. Gold meanwhile was at the $1,250/oz zone as it awaits the next big catalyst.

What will that catalyst be? Donald Trump of course cannot be ruled out amid speculation his healthcare bill could be revived as early as next week, there is the upcoming French election and there are two more interest-rate hikes likely on the agenda in 2017. But it is a strange time when moves seem counter-intuitive. Stay careful.

Market signals

Asian session

  • Asian firms with a big UK presence such as Tata, HSBC face post-Brexit uncertainty
  • Oil rallied to a three-week high as US stockpiles rose more slowly than forecast
  • The Nikkei 225 retreated; it was down 0.85% to 19,054.85 at 0540 GMT
  • The Westinghouse bankruptcy has left the future of Toshiba looking fragile
  • The Shanghai Composite was down by a hefty 1.12% to 3,202.14 at 0500 GMT
  • China's tech giant Tencent snapped up a strategic 5% stake in Tesla
  • China's consumer confidence scored 64% in a Credit Suisse survey, a sharp rise
  • The Kospi Composite was down 0.26% to 2,161.43 at 0442 GMT
  • The release of its Galaxy S8 smartphone gave Samsung shares a boost
  • The troubled electronics giant has pinned its market leadership hopes on the new phone
  • The S&P/ASX200 closed up 39% at 5,896.50 , thanks to banks and miners
  • Australia's monthly new-home sales edged up 0.2% in February
  • The EU has blocked the London Stock Exchange merger with Deutsche Borse

Forex ahead

  • The pound and euro both fell against the dollar when Article 50 was triggered
  • The pound was worth just 1.2439 at 0504, down from yesterday's high of 1.2460 
  • USD hovered near a one-week high against a basket of currencies in Asian trade
  • The US dollar rose against the yen; it was worth ¥111.2505 at 0504 GMT
  • The Aussie dollar firmed on higher crude prices; it was worth 0.7663 at 0502 GMT

From the Floor

Bulls return. "The market has shaken off Trump's healthcare defeat," says Garnry

Hawks over Frankfurt. "In the long term, rates have to move higher in Europe," says Boye

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1..2..3
Inflation in Europe is back in the headlines today with economists predicting Germany’s consumer price index will edge lower in the March report, says James Picerno.

Brazil's makeover
The end of the calamitous regime of Dilma Rousseff in 2016 has encouraged international investors to flood into Brazil again, after new president Michael Temer implemented a far-reaching reform program, writes Michael Boye.

Divorce terms
The UK has bitten the bullet and now embarks on a two-year negotiation process that could see a £50 billion bill land in Theresa May's in-tray in 2019, says #SaxoStrats.

Look back (not) in anger
Theresa May pulled the trigger on Article 50 Wednesday setting in motion the UK exit process from the EU. It is critical that cool heads prevail over the next two years, writes Stephen Pope.

Positive exit
Britain’s exit from the European Union is likely to be a positive development for the UK over the medium and long term, explains Neil Staines.

nnn
In a portent of rocky UK/EU relations, the EU has blocked a £21bn merger between the London Stock Exchange and Deutsche Börse, based in Frankfurt, above. Photo: Shutterstock

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2y
Martin O'Rourke Martin O'Rourke
Dollar continues to make headway against its peers with USDJPY just above the 111.0 handle, EURUSD below 1.0750 and GBPUSD slipping towards the 1.2400 mark at 0757 GMT.

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