The big speech today from the Prime Minister has, unsurprisingly, led to a degree of risk-off sentiment across equity markets, and not just in the UK.
It turns out that the FTSE 100 really can go down as well as up and some of the key risers of the past few days, such as BHP Billiton, are enduring a bout of profit taking.
Top of the index is Asia-focussed bank Standard Chartered, which has been the beneficiary of several broker upgrades in the past 24 hours, and could also be viewed as a decent alternative to the UK banks that will struggle as the Brexit process begins. Standard Chartered has struggled to find a positive narrative in recent years but perhaps it has finally found an unlikely rescuer in the form of Theresa May and her ‘hard Brexit’ approach.
The other star performer is Rolls Royce, whose decision to settle with authorities in the UK and US has provided the fuel for a relief rally. It’s always good to get these things out of the way and the share price seems to have taken the news as a chance to break out of the trading range that has prevailed since mid-November.
The President-elect has taken a few swipes at companies of late but now he has turned his attention to the US dollar, noting that the currency is too strong especially versus the yuan – his favourite bugbear. As a result we are seeing a further unwind of the ‘long USD’ position that has dominated since the election. Quite what Mr Trump plans to do about the greenback remains to be seen, but the weakness here spells more gains for the euro and yen and thus suggests further pain for equity markets in these countries.
Ahead of the open, we expect the Dow Jones to start at 19,834, down 51 points from last night’s close.
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