As the trading week gets under-way, once again it is the political world that has the attention of markets. Below David Jones, Chief Market Strategist at Capital.com, discusses his thoughts on this week’s markets.
The decision by the UK’s Brexit Secretary David Davis to resign late on Sunday evening may have been expected to unsettle some – but that hasn’t been the case so far. At mid-morning, the UK stock market was slightly higher and that Brexit-barometer – the pound – was trading at its best levels for almost a month. At first glance, this rise might seem somewhat illogical. But traders seem to be taking the weekend discussions and Davis’s resignation as the sign that a soft Brexit could be on the cards – although the resignation does not exactly add much stability to Prime Minister May’s government.
Politics is likely to be making the headlines for the rest of the week as US President Trump visits the UK. But it’s another important week for the US markets as it is the start of earnings season. It kicks off on Tuesday with Pepsico but the main focus is likely to be Friday when the banks such as JP Morgan and Citigroup reveal how the last quarter was for their businesses. Expectations are running high that the last three months have been good ones – any misses here could well dent the near 105% recovery US stocks have enjoyed over the past three months.
In other markets, oil remains just below its recent three and a half year high. The last 12 months have seen the crude price rise by 70%, with little impact so far on the bigger economic picture. It does feel as if something needs to give here – $100 a barrel oil would surely start to slow down the world economy, but for now at least any dips in the price of crude just serve to fuel more buying.