A few quiet days on the Sino-US tariff front have helped Asian and European markets higher this morning but the positive opening on the FTSE was only short lived. Declines by steel makers and several industrials are balancing out bounces in NMC Health (LON:NMC) and mining companies.
Leadership battle sets scene for more currency volatility
Two days after the results of the European election have been totted up the pound is nudging lower against the dollar and the euro on concerns that the overwhelming win by the Brexit party will make a no-deal Brexit one of the more favoured options in Westminster.
Summing up all the pro-Brexit and anti-Brexit votes it is clear that the difference between the two remains relatively small, setting the scene for a ferocious political battle between now and the end of October, the Brexit deadline.
Sterling is trading at $1.2662 and is facing more volatility over the course of the week as the battle for the leadership of the Conservative Party starts in earnest. Home Secretary Sajid Javid is the latest contender to throw his hat into the ring following Esther McVey, Rory Stewart and Boris Johnson.
It will be interesting to see how the results of the European election force not only the Conservative party but also Labour to rethink their Brexit policy and come up with a much more definite pro or against approach.
An Italian summer
Italian bonds yields are nudging higher and the euro is losing ground against the euro at the prospect of the European Commission imposing a large fine that could be on the scale of several billion euros on Italy for breaking EU rules. Brussels officials are looking into taking disciplinary steps against the country over its loose public finances with a decision possibly taken by 5 June. However, the country’s deputy prime minister Matteo Salvini is getting ready for battle against European fiscal rules which he has called outdated and unfair.
Oil lower as Iran threat eases
President Trump eased the pressure on Iran saying that it was possible to reach a deal with the country about its nuclear programme and thereby causing Brent crude to fall below $69 this morning.
The market reaction was somewhat muted because of an ongoing tightness caused by thinner supplies from Venezuela and Iran and an earlier contaminated batch of Russian oil.
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