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May there be hope for Brexit? Pound rallies after no-deal rejection - EMEA Brief 14 March

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  • The pound rallied to a new high after British MP reject leaving the EU with a no-deal. As the rejection passed by 312 votes to 278, the pound gained 2% against the dollar, reaching new highs for the year of 1.3339, as investor's received the no-deal rejection as good news for the future of the British economy.
  • Us stocks rose on Wednesday as strong economic data boosted tech shares. The S&P 500 saw gains for a third day in a row, closing 0.69% higher at 2,810.92. The Dow Jones and the NASDAQ also pushed higher, as they closed at 25,702.89 and 7,643.41 respectively.
  • Boeing shares managed a marginal reverse on Wednesday as they were up by 0.5%, after closing 11% lower on Tuesday as more and more countries ban the disaster struck 737 Max from flying over their air space.  Boeing's market value has fallen from $238.7 billion to 212.1 since the fatal crash in Ethiopia in Sunday, as Boeing yesterday announce it had grounded all 737 Max 8 aircrafts as a precautionary measure in response to safety fears.
  • Asian shares were trading lower on Thursday morning as mixed macroeconomic data  from China signalled further weakness in its economy. Its industrial output fell to new lows, whilst its retail sales and property investments improved marginally.
  • Brent crude oil futures were trading at a new high for 2019 during the Asian session, as the barrel was priced at $58.38, close tot he highs of November 2018. Prices have pushed higher as a result of continued cuts to production and Us sanctions imposed against major oil produces Venezuela and Iran.

Asian overnight: A bearish if unconvincing session overnight saw marginal losses across Japanese, Chinese, and Hong Kong stocks. This came in the wake of disappointing Chinese industrial production figures, which fell to a 17-year low of 5.3%. While we did see marginal improvements in fixed asset investment, the jump in unemployment from 4.9% to 5.3% helped determine the tone.

UK, US and Europe: Britain faces one of the biggest challenges of the Brexit journey as both a deal presented by PM Theresa May and a no-deal Brexit have been rejected. MPs will today vote on whether they wish to extend article 50 and be granted extra time by the EU to leave the bloc. If they vote against the extension, the UK will, by default,  crash out of the EU on March 29, and even if they do vote to extend article 50, there is no guarantee that the EU will grant the extension. The problem is that there seems to be no alternative plan or solution offered to solve the impasse in Parliament, and unless the British government can assure the EU that they have a plan in place to deliver Brexit in the near future, they will probably be forced to extend Brexit by a much longer period than they wish. For the pound, a longer extension period would certainly be preferable over a short one.

The dollar has renewed some short term strength and in turn we are seeing precious metal prices retracing from their recent run. Oil prices have gained following reports of lower inventory being held by US commercial firms.

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

14mar.PNG

Source: Daily FX Economic Calendar

UK Parliament to vote on whether to seek an extension to Article 50
7am – German CPI (February, final):
CPI to be 1.6% YoY. Market to watch: EUR crosses
2pm – US new home sales (January): sales expected to fall 1.3% MoM. Market to watch: USD crosses

Corporate News, Upgrades and Downgrades

  • Capita reported a 26% fall in pre-tax profit, to £282.1 million, while revenue was down 5% to £3.87 billion for 2018.
  • Cineworld said that pre-tax profits rose 125% in 2018 to $284.3 million, while revenue was 260% higher at $4.12 billion. Group admissions were up 2.6% to a record 308 million.
  • Debenhams said that it would give careful consideration to a proposal from Sports Direct to provide a £150 million unsecured loan.

Quilter upgraded to overweight at JPMorgan
TUI upgraded to overweight at Morgan Stanley
Ultra Electronics upgraded to buy at Berenberg

Adidas cut to hold at Baader Helvea
Schindler downgraded to hold at SocGen
Systemair downgraded to hold at Kepler Cheuvreux

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