FTSE rallies after fails to steer a clear course on Brexit

A day after an open set of votes in Parliament failed to produce a resolution to the Brexit deadlock, markets remain slightly adrift. Banks and financial firms came under pressure this morning but the FTSE still managed to head higher after a lukewarm opening. The pound, which is the better gauge of how the markets perceive Brexit, is losing ground against the dollar and the euro but, more importantly, sterling volatility is rising to the highest level since the 2016 Referendum.

China trade progress may slow Wall Street decline

Other European indexes are also making progress this morning despite a lower close across US indices as Wall Street grapples with the domestic US economic slowdown. The US-China trade talks seem to have made some palpable progress on contentious issues of technology transfer and the limitations on US companies operating in China; this is raising hopes that the eventual resolution of the dispute will go some way to alleviate the drag effect of slowing global growth.

US bond yields on an upward trajectory

The Fed’s recent rate hike turnaround is continuing to create demand for US bonds and suppress yields on government debt, pushing the yields on 10-year US government paper below the level of 3-month yields. This kind of inversion in the yield curve tends to be the harbinger of recession, signalling the start of an economic decline within the next one to two years. The last time yields were inverted in such a way was in 2007 before the start of the 2008 financial crisis.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.