Week ahead promises turmoil

The FTSE and other European indexes are higher at the start of the week which promises turmoil as the Brexit situation shows no sign of a solution, the US government potentially heads for another shutdown and the key global trade dispute with China remains unresolved.

Weaker sterling is proving helpful to London blue chips while travel operator TUI is bouncing back from a selloff late last week. Miners and oil companies are also gaining ground as Brent crude stabilised around $62 following last week’s plunge.

China reopens, US to shut down?

Just as China reopened and settled back into a trading routine after a week long celebration of Lunar New Year the US markets will have to potentially deal with another government shutdown.

Funding for the US government will run out on February 15 and given that the weekend talks between US Democrats and Republicans have failed it is fully possible that US government agencies will be forced into another unpaid holiday from next week.

A resolution to the Sino-US trade talks is also looking less likely despite two top US negotiators heading for Beijing later this week given Trump’s negative comments earlier in February. The negative implications for US stocks are clear, particularly technology stocks, at a time when global economies are already slowing.

UK GDP and the pound

The pound is gently heading lower against the dollar this morning indicating low expectations for UK GDP data that is due to come out later today. But while GDP numbers would have carried reasonable weight in a normal week, now with the Brexit deadline approaching and the likely outcome not being any clearer there is actually little chance for sterling to turn the corner.

Brussels is proving reluctant to engage in any serious renegotiations of the current Brexit proposal while the Labour party is trying to nudge the PM Theresa May in the direction of customs union, one of her red lines.

Though there is a 13 Feb deadline to vote on a Brexit proposal in Parliament there is no compromise deal in sight. Eventually something, or somebody, will have to give, as the deadline of 29 March approaches like a speeding train.

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.