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Brexit secretary resigns - EMEA brief 9th July

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  • David Davis resigns from his poll position as Brexit secretary. Sterling feels the pinch.  
  • Global equity markets rally on US jobs relief, whilst dollar falters. 
  • Balanced U.S. jobs data suggest Fed can stay gradual on hikes 
  • Oil inches up whilst gold gains on the weaker dollar.
  • NYSE technology chief has jumped ship to join the Winklevoss ‘bitcoin billionaires’ cryptocurrency venture as their first CTO for Gemini.

Asian overnight: Asian markets have seen substantial gains overnight, as we see a continued feedback from Friday’s strong US jobs data and easing fears over the US - China trade war. The US non-farm jobs report alluded to an improving labour market with 213 000 people being added t the payroll last month, where expectation was for 195000 people to have been added. The dollar has softened somewhat lifting commodity prices, in particular that of precious metals.

UK, US and Europe: The overnight resignation of UK Brexit Secretary David Davis had added a focus onto the pound, with the weekend gap higher erased as markets seek to find answers of what this means for negotiations with the EU. British Chambers of Commerce believe forward looking indicators predicting the growth of the economy are not strong enough to warrant a rate rise at the next MPC meeting on August 2nd. A poll conducted by the group reviewed more than 6000 firms from the UK.

The economic calendar looks relatively quiet for the day ahead, and that bullish theme overnight seems likely to carry through into European trade. Look out for appearances from ECB governor Mario Draghi, alongside BoE member Broadbent. 

South Africa:  The rand has managed to claw back some of its recent losses, as outflows from emerging markets halt for the time being. We are expecting broad-based gains on the JSe initially, with a stronger rand aiding a rebound in local banking and retail counters. BHP Billiton is up 2% in Australia suggestive of a positive start for resource counters. Tencent Holdings is up 2.53% suggestive of a positive start for local holding company Naspers.   

Company earnings: Pepsi will report second quarter results tomorrow, whilst fashion house Burberry and America's Delta Airlines will follow on Wednesday and Thursday respectively. We also see big banknames Wells Fargo, JP Morgan Chase and Citigroup finish the week on Friday.

Economic calendar - key events and forecast (times in BST)

1680452813_2018-07-0907_54_56-ForexEconomicCalendar.png.b590f20d6d72ede1bf6899d4294a5cb4.png

Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

  • Centamin said that gold production fell 25% in Q2, due to low metal grades at its Egypt mine. Production was expected to be 505,000 to 515,000 ounces for the full year. 

  • Purplebricks has completed the acquisition of Canadian estate agency Duproprio/Comfree, for £29.3 million.

  • Murray & Roberts Holdings (SA) - Shareholders are referred to the announcement released on SENS today by Aveng regarding a notification received from ATON on Thursday, 5 July 2018, indicating that ATON and its wholly owned subsidiary ATON Austria Holdings GmbH, have in aggregate, acquired an interest in the ordinary shares of Aveng, such that the total interest in the ordinary shares of Aveng now amounts to 25.42% of the total issued ordinary shares of
    Aveng. 

Beazley upgraded to top pick at RBC
G4S upgraded to top pick at RBC
Meggitt upgraded to buy at Berenberg
TalkTalk upgraded to neutral at JPMorgan
UBS upgrade Barclays Africa from sell to neutral with a target price of 19700c
Nedbank Limited’s (SA) national scale rating was upgraded to ‘zaAA+’ from ‘zaAA’ by S&P

Hargreaves Lansdown cut to underweight at JPMorgan
Virgin Money cut to equal-weight at Barclays

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Boris Johnson has followed with his resignation.

What strategies are others within the IG Community adopting with Brexit in mind? 

There could be a wonderful opportunity if the UK stock market crashes for picking up stocks reminiscent of the financial crisis in terms of value (cheap).

Make sure you are ready with capital loaded up in case some very special buying opportunities come that appear once in a lifetime.

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I suspect this will be the same as the Brexit issue has been since the referendum, a play on the £ rather than a play in the index. But interesting times lay ahead, May may be finished, tories split, Corbyn wins snap election (then you'll really see the £ drop). Great days.

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@Caseynotes, there is a lot of foreign capital invested in say the FTSE 100 index from various countries around the world. This includes pension funds, sovereign wealth funds, etc.

Should they all get jittery due to the final Brexit deal then there may be a run on say the FTSE 100. I am not suggesting there will be one but it is possible should the deal be bad for the UK.

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True enough anything is possible, for example German car makers could get into real trouble if they get a double hit from Trump's trade war and a no deal Brexit, that's two of their largest markets. Exciting times.

 

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