LCG Research team
London Capital Group
The timing of US President Trump landing on British soil couldn’t have been worse for Prime Minister Theresa May. The same day that she publishes her whitepaper outlining the post Brexit UK-EU relationship, as a softer version of Brexit, Trump a known supporter of a hard Brexit grabs the spotlight.
Trump’s declaration that this softer version of Brexit would mean that a trade deal with the US was “probably” off the table, was a blow to both host Theresa May and the pound, sending sterling tumbling overnight. Let’s not forget that the hope of a quick trade deal with the US was a significant factor in Theresa May’s decision to invite Trump in the first place. Another embarrassment that May could have done without.
Trump’s words of no deal have confirmed the fears of Brexiteers and will have stoked the fire in the hard Brexit camp, making Theresa May’s future in charge look doubtful once more. This fear was reflected in the pound as it dropped sharply in late night trading. With no high impact UK economic data due for release today, pound traders will continue to watch political developments. Trump and May are expected to hold a joint press conference after lunch where they will both be pressed for trade comments. In the absence of any encouraging trade comments, gains in the pound going forward could be limited, and a meaningful move over $1.32 could be doubtful.
Tech Stock Rally Lifted Nasdaq to Record High
Once again, a lull in trade war talk saw risk appetite rebound and Wall Street posted some impressive gains overnight, in anticipation of earning season unofficially kicking off today. Tech stocks were standout performers with the Nasdaq hitting a fresh record high overnight, as the likes of Amazon, Alphabet and Facebook and Microsoft all reached all-time highs as well.
The lack of a tit for tat response from China following Trump’s announcement of tariffs on a further $200 billion of Chinese imports sparked a rally in equities. The bullish moment from Wall Street transferred into Asian markets overnight and is set to carry through to European bourses this morning.
Expectations Running High for US Earnings Season
With US earning season starting and expectations running high, traders have effortlessly switched their focus back onto fundamental drivers of the market and away from political headlines. The robust US economy, high consumer confidence and low borrowing rates provide a solid backdrop for some impressive figures, and that is before we draw in the benefits of the Trumps tax cuts. Wells Fargo and Citi are first up.
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