EU agreement weakens stocks
|In sharp contrast with the US and Asian markets, both of which had a good day of trading that concluded with a positive close, the latest round of Brussels talks left a bitter aftertaste for the FTSE. The index is sliding, as are other European bourses, as Britain’s position within the EU remains unresolved. In addition concerns that the upcoming Sino-US trade discussion will make less progress than initially hoped are also weighing on European markets.
The closing rally on Wall Street, which pushed the Dow Jones Industrial Index to the highest level since mid-February, initially spread into Asian markets but then ran out of steam this morning.
In London, retailers and house builders are performing well but again, not enough to stem the malaise in a range of other sectors. A spike in sterling’s exchange rate against the euro didn’t help but was not the dominant factor.
Sterling recovers
Sterling gained 73 pips against the euro after the EU granted Britain a stingy reprieve before article 50 is triggered. The currency spiked at one point to EUR1.16 before nudging slightly lower but did not make a dent against the dollar, trading only marginally weaker against the US currency.
Though the agreement with the EU – that Britain can extend the article 50 deadline until the day before European elections in May if MPs agree to the current Brexit proposal, or that it can submit a request for a longer delay until April 12 – boosted the pound, it fundamentally provided only a short reprieve as the country remains without a resolution about its future. Under the circumstances the markets will have no option but to remain volatile and dominated by Westminster headlines in the weeks to come.
Meanwhile gold is continuing to benefit from this week’s Fed decision to keep US rates on hold for the remainder of the year. The precious metal continues to attract safe having buying, particularly in Europe, where Brexit concerns are adding to the mix of arguments in favour of an asset uncorrelated to shares and currencies.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.