Markets were steady on Monday with no sign yet of a resumption of last week’s dip-buying in stocks. Anecdotally, traders appear to be waiting for FOMC minutes and the US unemployment report to test the conviction of Fed members signalling 3-4 hikes this year.
Apart a spurious social media-based poll reported in Russian media over the weekend putting Francois Fillon ahead, French election polling has been devoid of upset isn’t causing much concern for markets. Still we know from the Brexit and Trump pattern, markets only really start paying attention to important elections the week before.
The pound and UK stocks fell in unison on Monday after the EU figuratively scrunched up Theresa May’s Article 50 letter and lobbed it into the bin over her demand for tandem trade and exit talks.
Stocks
Early gains slipped away by the afternoon following some disappointing manufacturing data and reports of deadly explosions on the St Petersburg subway.
Germany’s DAX was the exception to the rule of lacklustre trading in Europe, coming within a whisker of its all-time high. The German index seems to have gained a new lease of life since Angela Merkel’s party had its run-way election victory in the state of Saarland. Political stability in Europe passed its first test after the Dutch election, making European shares look relatively more attractive than US peers.
Shares of Burberry (LON:BRBY) led the FTSE 100 higher on news it would license its cosmetics business to Coty (NYSE:COTY). It’s not exactly a flagship deal for Burberry in itself but could be a gateway to a new revenue model. Licensing cosmetics out to Coty allows Burberry to monetize the cachet of its brand without the overheads.
Imagination Tech comfortably took the bottom spot in the FTSE 250. Investors gutted Imagination shares when Apple (NASDAQ:AAPL) failed to renew its partnership.
Currencies
Threat of a diplomatic spat between UK and Spain over the post-Brexit future of Gibraltar damaged sentiment toward the pound. Disappointing UK manufacturing data for March added to Sterling’s woes.
Gibraltar is the perfect example of the deep ties between the UK and the EU. Presumably a diplomatic solution can reached without war between the UK and Spain but demonstrates the kind of curve balls the negotiations will throw up. The pound fell against the euro and the dollar on Monday with GBP/USD dropping back below 1.25.
European economic data was a mixed bag leaving the euro down against the buck but up against the pound. Italian unemployment unexpectedly fell to 11.5% with youth unemployment falling to the lowest since August 2012.
Commodities
Oil broke out of its short term double bottom pattern after supportive comments from OPEC Secretary-General Barkindo. Barkindo seeing oil stockpiles coming down reaffirms the belief behind the big pickup in oil prices last week. High compliance with existing output cuts and some members of OPEC calling for an extension contributed to the biggest weekly gain for Brent crude this year last week.
Gold was caught in the crossfires of some demand for a haven after the Russian subway explosions and strength in the dollar after strong manufacturing data. Precious metals have eased back from a strong rebound off the lows on Friday.