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Tag Archives: Brexit

Draghi Ends Calm Ahead of FOMC, Sending the Euro and Yields Down

Overview:  ECB President Draghi underscoring the likely need for more stimulus broke the subdued tone as market participants took a "wait and see" stance ahead of tomorrow's FOMC decision.  Draghi's comments sent the euro through $1.12 for the first time in two weeks and drove European bonds yields to new lows.  Asian equity markets were mostly higher, with the exception of Japan.  As order returned to Hong Kong, it was the Hang Seng that led the region with a little more than a 0.9%...

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Brexit Dithering

With the Tory Party leadership contest set to dominate British political news for the next few weeks, Brexit is going on hold. Not only does this mean no forward motion on the UK side (even if it were capable of that), but by the time the dust settles, with the Tory membership vote set to start on July 22, is when everyone who matters in the EU is about to go on holiday. So that leaves only two months to get anything done, charitably assuming the UK will prove capable of that. I’m at risk of...

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Kill Bull: Intermission

Overview:  After significant moves in equities and interest rates, investors are taking a collective breath, waiting for fresh developments.  A nervous calm has settled over the capital market.  China, Japan, and Australian equities leaked lower, but other bourses in the region, including Korea and Taiwan posted modest gains, while Indonesian equities are still responding positively to the recent election.  European equities are steady with the Dow Jones Stoxx 600 up about 0.3% in late...

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Risk Appetites Curbed, US Leadership Awaited in FX

Overview: The euro initially reacted positively to the EU Parliament elections. The populists did not do quite as well as many expected.  The two main groupings failed to secure a majority, but with the help of the Liberals, and possibly the Greens, that did well throughout Europe, a new European Commission will be forged.  The heads of state meet later today, but no real decisions are likely.  The horse trading will likely take most of the next few months.  With the PP securing the...

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The Evolution of Three Issues are Key in the Week Ahead

As May winds down, the light economic calendar will allow investors to take their cues from the evolution of three disruptive forces--trade, Brexit and the US economy.   With actions against Huawei and possibly a handful of Chinese surveillance equipment producers, the US raised the stakes. The retaliatory tariffs are effective on June 1, but Beijing has not formally responded to the moves against Chinese companies.   The Trump Administration seems to believe that the pressure from...

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How UK Tories will Pick May’s Successor?

There is a two-step process to pick the next head of the Tory Party. The leader will be the Prime Minister and head a minority government. May’s minority government was supported by the Democrat Unionist Party from Northern Ireland. It is not clear that if a hard Brexiter succeeds May, the DUP will support it. This could trigger snap elections. The process begins with the Conservative members of parliament submitting formal recommendations. Assuming more than two are nominated a...

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What Kind of Currency Bounce is This?

Overview:  It seems clear that the world's two largest economies slowed before the tariff truce ended.  Many investors believe that the tariff truce helped stop the equity market meltdown through most of Q4 18.  The net result of weaker stocks and lower bond yields seems reasonable.  The dollar is an anomaly. It began off strong yesterday.  The euro slid to a new 18-month low.  Sterling approached $1.26, which it has not seen since the flash crash. The Dollar Index made a new since May...

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Trade, Brexit, and Disappointing Flash PMIs Weigh on Global Markets

Overview:  The deterioration of the investment climate is spurring the sales of stocks and the buying of bonds. The dollar is firm.  China and the US appear to be digging as if the trade tensions will remain for some time and the breech is beginning to look too big for Trump and Xi to pull another rabbit out of the hat like they did at the end of last year when the tariff truce was struck.   The move against Huawei and possible a number of companies involved in surveillance equipment...

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Is Theresa May Finally Over?

The political demise of the UK’s prime minister has been so overpredicted that it’s hard to believe that she might finally be leaving. But the resignation of Andrea Leadsom, May’s minister who managed the Commons, may be the fatal blow. The Times (which has gotten a great deal wrong on Brexit) reports that May’s supporters anticipate she’ll announce her departure after a meeting with Graham Brady, who heads the 1922 Committee. Recall that May managed to get them to hold off on plans to...

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Sterling Can’t Get Out of Its Own Way

Overview:   There is a nervous calm in the capital markets.  Yesterday's rally in US shares failed to excite global investors.  China, Hong Kong, and Taiwan markets fell, while Japan was mixed. Foreign investors continued to sell Korean shares, but the Kospi rose.  European shares narrowly mixed, leaving the Dow Jones Stoxx 600 little changed. There are two notable exceptions to the slightly softer 10-year benchmark yields.  The first is the couple basis point increase in China (to a...

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