Tuesday March 26: Five things the markets are talking about
Global equities have rallied overnight after two session of losses as the U.S 10-year Treasury yields backed away from this year’s low yield print, but the outlook remains somewhat uncertain as investors weigh the possibility of the U.S slipping into a recession.
Note: The 10-year note has backed up to +2.442%, having lost -5 bps yesterday and dropped temporary below the three-month bill.
U.K MP’s take control for a day
In FX, sterling (£1.3185) has edged lower after PM Theresa May lost control over the Brexit process in a U.K Parliament vote late last night. MP’s may now be able to demand that the PM pursues radical Plan B options, potentially including a second referendum, keeping Britain in the EU union, or even canceling Brexit. Remember, a no-deal Brexit does remain on the table!
MP’s are expected to vote on a range of Brexit options tomorrow (Mar 27), basically looking to agree on a deal with closer ties to Brussels – and then try to drive the government in that direction.
In commodities, oil prices have rallied for the first time in a number of days amid rising tensions in Venezuela that again threaten to further curb supplies.
On tap: U.S consumer confidence & RBNZ monetary policy announcement (Mar 26), CAD trade balance & NZD business confidence (Mar 27), U.S final GDP (Mar 28), GBP current a/c, CAD GDP & U.K Parliament vote (Mar 29).
1. Stocks given the ‘green’ light
In Japan, the Nikkei rallied aggressively from its five-week lows print on Monday to close sharply higher overnight as cyclical stocks rose on short-covering. The market is also being supported by investor purchases of stocks before they go ex-dividend at the end of March. The Nikkei share average ended +2.15% higher, while the broader Topix rallied +2.57%.
Down-under, Aussie shares closed marginally higher overnight, helped by mining shares and an uptick in U.S Treasury yields. The S&P/ASX 200 index firmed nearly +0.1%. The benchmark fell -1.1% on Monday. In S. Korea, the Kospi stock index rose slightly (+0.18%) overnight as foreigners turned net buyers following Monday’s sharp selloff. The index has risen +5.28% so far this year and fallen -1.5% in the previous 30 trading sessions.
In China, shares fell overnight, extending this week’s sharp losses as investors remain concerned over the outlook for global growth and the next round of China-U.S trade talks to take place later this week (Mar 28/29). At the close, the Shanghai Composite index was down -1.51%, while the blue-chip CSI300 index was down -1.13%.
In Hong Kong, equities were steady after Monday’s heavy losses, but investor sentiment remains fragile as concerns over the possibility of a U.S recession happening, and as China and the U.S prepare for this week’s high-level trade talks. At the close of trade, the Hang Seng index was up +0.15%.
In Europe, regional indices trade mostly higher following on from a stronger session in Asia overnight and higher
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