British pound supremely beaten

Stocks still Trump-watching

Having lost their lustre in the hours following the inauguration of President Donald Trump, equities appear back in demand.

UK stocks spent most of the day in narrowly positive territory after the British Supreme Court ruled the triggering of Article 50 to leave the EU would require parliamentary approval. ITV was a top riser amid renewed bid chatter but shares of BT and EasyJet got clobbered after issuing profit warnings. The FTSE has stabilised just above 7,130, the peak made in November, indicating some buying interest is starting to re-emerge. 

Indices across Europe rose with varying degrees of conviction, supported by a weaker euro. The single currency fell against the dollar after data showed the service sector unexpectedly slowed in January.

Pound supremely beaten

The court ruling sent the British pound lower, though it finished well off its lows. There was an element of ‘buy the rumour, sell the fact’ in currency markets to the well-telegraphed decision. In all likelihood Article 50 will still be triggered in March irrespective of the Supreme Court. In many ways this is just one less roadblock out of the way before the UK leaves the EU. If anything, the net effect leans towards a harder Brexit in that Scotland and the devolved assemblies, which mostly voted to Remain in the EU, will have less say.

We believe the added clarity over Brexit negotiations from Theresa May’s Brexit speech as well as this Supreme Court decision supports Sterling, but it has come a long way in a short time and a pullback is overdue.

President Trump Day 2

Shares on Wall Street opened on a firmer footing as Donald Trump displayed a bit more of a pro-Business spirit in his agenda for Tuesday. The Donald is meeting the chief executives of the ‘Big Three’ automakers and will reportedly sign an executive order to push forward on the Keystone XL and Dakota pipelines which were side-lined under Obama. Markets have been weathering Trump’s projectionist stance on international trade, waiting for the first signs of tax cuts and deregulation.  

The US dollar recouped some of the losses following the suggestion by incoming Treasury Secretary Steve Mnuchin that an “excessively strong dollar” could hurt the US economy. Although there’s no direct impact – it’s significant when both the President and the Treasury Secretary share the opinion the dollar is too strong.