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A No-Deal Brexit Could Shave Off 25% From Share Values

Published 11/12/2018, 17:55
Updated 14/12/2017, 10:25

Sino-US talks boost markets

Signs that the Sino-US trade talks are making progress helped markets across the board and European indices rose between 1.5% and 2.2% while Wall Street gauges made gains of over 1%.

President Trump called Tuesday’s phone discussions between the US trade representatives and China’s Vice President “very productive” and said to watch out for an important announcement. This is just the kind of news markets needed to hear to calm other ongoing tensions – the abandoned Brexit vote in the UK, protracted protests in France and swelling fears of an economic slowdown in the US.

A no-deal Brexit could shave off 25% from share values

Given what is going on on the political front, the FTSE’s latest rally could represent just a brief respite before the index is hit by more negative sentiment. The world’s largest provider of global indexes MSCI predicts that the London index could plunge some 25% if Britain ends up leaving the EU without a deal in place, an outcome that is looking increasingly likely.

After deciding to postpone the key vote on her Brexit proposal the PM headed out to Europe Tuesday seeking to shore up support there to amend the current 585-page long proposal particularly on the contentious Northern Ireland issues.

Meanwhile at home the Scottish National Party started pushing for a vote of no-confidence in the government, something Labour has so far rejected, not on grounds of principle but based on timing, arguing that they would prefer to wait until Theresa May’s proposal was defeated in Parliament. In theory markets should start winding down next week in preparation for Christmas but at this rate everything but a quiet holiday season lies ahead.

Pound weakens again

The pound firmed a little bit against the dollar, recovering from the shock of the abandoned Brexit vote Monday, but by the close of trade it was back in negative territory, albeit only slightly.

Sterling held its ground against the euro to trade up 0.16%. The ongoing Brexit drama helped boost gold prices as investors looked for an interesting safe haven asset but here too the rally was only short lived and the precious metal ended the day barely changed.

Oil firm as Libya declares force majeure

Oil was the standout gainer among commodities as Libya faced production problems at one its key fields following a weekend military attack. A force majeure on the exports from the El Sharara field combined with the recently announced OPEC production cuts to help boost Brent crude prices 1.3% and WTI another 2.2%.

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.

Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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