The FTSE bounded higher on Thursday, latching on to improved global sentiment. Investors anxiety over the US – Sino trade war is easing, and risk appetite is cautiously returning. The weaker pound and stronger oil prices also offered support to the FTSE, which lagged only behind the trade sensitive Dax.
Yesterday the markets learnt that President Trump was willing to put off slapping tariffs on EU auto imports for six months. Whilst this boosted German car makers, investors are also reading between the lines. The assumption is that Trump is only looking to deal with one trade war at a time. The fact that he put off a decision on EU tariffs for six months has been interpreted by traders that the US – Sino trade dispute will be all tied up by then. This explains the second day of gains even as Trump put Huawei on an exports blacklist. As investors carefully put risk back onto the table, the safe haven yen dropped versus the dollar. Gold tumbled 0.5%.
Pound hits fresh 3 month low
Sterling extended losses on Thursday, which now total 1.5% across the week. Add these losses to the previous week's 1.3% tumble and the pound is looking very unloved.
Theresa May will attempt to push her Brexit deal through Parliament at the beginning of June. With Labour refusing to support the deal in its current state, the chances of Theresa May achieving her goal are extremely slim. Should she fail for a fourth time to get the necessary support for her Brexit withdrawal agreement, then it looks as if her time is up.
The concern for the pound is who comes next? A hard-line Brexiteer is the most probable candidate, meaning hopes of a softer version of Brexit are fading quickly. It is no coincidence that the pound fell as Boris Johnson announced that he was ready to pounce into Theresa May's position should it become available.
Oil rallies on middle eastern tensions
Oil rose for a third straight session on Thursday as tensions in the Middle East remain elevated. Concerns over supply disruptions are offering support to oil, pushing crude back towards $63. Brent rallied 1.4% and is on track for its biggest weekly increase in six weeks. Not only has Saudi Arabia experience sabotage attacks on oil pumping stations and tankers, the US also withdrew embassy staff from Baghdad over perceived threats from Iran. Supply in the oil market is already tight, so these headlines are ensuring the bulls stay in control.
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