November 16, 2018
Asian markets cautious about uncertainty over Brexit
Asian markets traded cautiously on Friday 16 November, with further uncertainty in the UK following the resignation of several key government ministers.
China's markets, which have been closely watched amid the trade dispute between Washington and Beijing, were bearish at the start of the session. Japanese equities lost initial gains, with the Nikkei 225 trading lower. In Australia, the ASX 200 declined, with most sectors in negative territory. However, the energy sector rose slightly and the financial sub-index remained largely unchanged.
The British pound struggled to stay afloat in Friday's Asian trade after a sharp drop in the European session. Following Thursday's events, investors fear a Brexit without agreement. Both the dollar and the yen benefited from a deepening crisis for the UK prime minister after the resignation of key government members jeopardized her Brexit plan. Some analysts believe that the pound bulls have a reason not to throw in the towel yet. They point out that there is the possibility of another referendum that will result in remaining in the European Union. Hostility from members of the British government and the opposition increased the risk that the agreement would be rejected in Parliament.
May's plan, which aims to maintain close trade links with the European Union in the future, have the opposition of all parliamentary groups and its own government. This increases the risk of the prime minister herself resigning and the likelihood of another referendum.
Oil prices rose in the Asian session on Friday, due to expectations of cuts in OPEC supply. However, U.S. record production continues to weigh.
Gold rose sharply to a one-week high during Friday's Asian trading as investors feared a chaotic exit of Britain from the European Union.
European markets are expected to open up Friday's trading session.
American stock market indices have plummeted
The main American stock market indices have plummeted lately.
J.P. Morgan Chase led the banks up on Thursday, November 15. On the other hand Apple, the manufacturer of the iPhone, recovered after plunging into bearish territory earlier in the week.
On Wall Street there have been many problems, on the technological side, because Amazon was damaged and is a very important weight. The same thing also happened with Facebook.
Crude oil is trying to go up, after the sharp crash of the last few days. The higher prices are negative both for airlines and for all tourism that depends on transport. However, weekly crude oil reserves have increased by more than 10 million, so there is still excess production in the United States.
Added to the above factors is the economic slowdown in China and Europe, which is viewed with concern from the Federal Reserve.
Retail companies are also in trouble. In the United States they have presented bad results. Sales forecasts for this Christmas are still very low, so the discretionary consumer sector is one of the worst.
The situation is complicated
Was a bearish session in Europe on Thursday 15 November, as there are no factors attracting capital to the European stock markets. What initially seemed to be a positive thing, with respect to Brexit, has derailed in very few hours. Four British government ministers have resigned, raising fears that an unresolved divorce will be forced. As soon as the resignations became known, the pound plummeted by -1.8 per cent. In addition, British banks have had many problems.
If we look inside the market, most supersectors are in negative. The major role was in travel and leisure, because the situation of divorce between the UK and the European Union would be very detrimental to this sector. The basic resources and the oil companies have been the best of the day in Europe because of the rise in the price of crude oil.
Automotive, and spare parts, has been a major negative weight in the German index, because it has received negative blows again. On the one hand, China has said that it has no intention of lowering taxes on the purchase of vehicles but, in addition, registrations of new cars have fallen again in Europe.
Paris does not rule out a Brexit without agreement
The Brexit agreement, reached between Brussels and London, is a big step in the right direction. However, it does not allay all concerns because of the internal situation in the UK.
At the moment there is nothing to know whether the agreement will be adopted, as British political current affairs raise concerns about ratification.
France is continuing to prepare a specific bill in the event that negotiations for Brexit fail.
The agreement reached between Brussels and London, which has led to a wave of resignations in Theresa May's Executive, has to be approved by the 27 and then ratified by the European Parliament and the British Parliament.
Theresa May calls on British Parliament to support national interest pact
Voting against will cause uncertainty, more division and betray the 2016 referendum.
Prime Minister Theresa May has gone to the House of Commons to explain the deal reached with Brussels. She has done so in the midst of a wave of resignations of her own ministers, protesting the terms of that agreement.
Despite the resignations, including that of the Brexit negotiator, May firmly defended the pact.
In his view, it is the best possible deal, reached after a complex and frustrating process in which both sides have made concessions.
According to May, the only alternative to the current pact is a Brexit without an agreement, which could create total chaos or reverse the country.
Chain resignations in May's government over the Brexit agreement
Dominique Raab, Minister of Brexit, and four other members of the Government have announced their resignation.
The pound falls by 1% on fear that the agreement will not be approved by Parliament. It is difficult to be optimistic about the pound in the short term, Nomura analysts say.
Raab has assured that he resigns because of problems of conscience, since he cannot reconcile the terms proposed in the agreement with the promises made to the country.
The minister's decision has provoked a chain reaction of resignations and before ten o'clock in the morning May had another four letters of resignation on his desk.
Moody's warns that China's public debt will grow between 2019 and 2020
Rating agency Moody's warns that China's public sector will reach a debt level equivalent to 149% of GDP by the end of this decade. It will do so because the authorities will resort to greater leverage to sustain growth via public spending.
Public sector debt includes government debt and that of state-owned enterprises.
The report says that China is slowing down because the measures proposed so far appear to be negatively affecting domestic activity, in addition to the risks arising from the tariff war with the United States.
[image] The exchange rate is always given for a currency pair. A currency by itself is worthless if it is not compared to another currency or other reference, such as gold. Therefore, whether in a flexible exchange rate or fixed exchange rate...
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