Market Overview

Brexit Worries Cap European Market Moves: 5 Things The Global Markets Are Talking About Today


Earlier this week British Prime Minister Theresa May agreed a draft Brexit withdrawal agreement with Brussels. Her cabinet backed it on Wednesday, but several ministers turned in their resignations soon after.

Six government ministers, including Brexit Secretary Dominic Raab, one of the architects of the deal, quit on Thursday, raising the possibility that she could face an open challenge to her leadership.

The next few days will be critical for May's Brexit deal and her leadership, as she tries to suppress a rebellion that has been brewing for some time — some party members are openly plotting to try to trigger a no-confidence vote in an effort to force May to negotiate a different deal with Brussels.

A leadership challenge can be triggered if 48 Tory lawmakers submit letters of no confidence to the 1922 committee. Even if, such a challenge does occur, its not expected that a majority of Tories would then vote in favour of ousting her from office.

However, 48 lawmakers would mean the prime minsiter will not have the party support to get a Brexit deal voted through Parliament and a clear signal that PM May would have to go back to the negotiating table.

With this in mind, here are five things the global markets were talking about on Friday.

1. Global Equity Markets Post Mixed Results

Stock markets remain volatile as the slowing Chinese economy and uncertain outlook for corporate earnings overlap with investors adjusting to the effects of a tightening U.S. monetary policy.

In Japan, the Nikkei fell 0.6 percent overnight, as a drop in semiconductor-related stocks weighed on the index along with gaming stocks. The broader Topix also dropped 0.6 percent. The index fell 2.6 percent this week.

Australian stocks ended slightly lower on Friday with commodity names trumped by a number of negative factors including a tech sell-off and Brexit turmoil. The S&P/ASX 200 index eased 0.09 percent at the close, bringing the weekly losses to a sizable 3.23 percent, largely hurt by global growth worries.

In South Korea, the stock index closed marginally higher on Friday, trimming the session's early gains, amid uncertainty over Brexit. The Kospi index closed up 0.21 percent.

In China, stocks rallied overnight, helped by banks and by securities companies on the back of a broad recovery in the equity market. The Shanghai Composite index ended 0.4 percent higher, gaining 3.1 percent for the week. The blue-chip CSI300 index was up 0.5 percent, posting a weekly gain of 2.8 percent.

In Hong Kong, stocks rose marginally as China and the U.S were seen as drawing closer to formal trade negotiations. The Hang Seng index was up 0.3 percent overnight, and up 2.3 percent for the week. The Hang Seng China Enterprises index rose 0.3 percent.

2. Oil Rises On Expected OPEC Cuts

Oil prices rallied overnight amid expectations of supply cuts from OPEC, although record U.S. production continues to cap rallies.

Brent crude oil futures are at $67.49 per barrel, up 1.3 percent from Thursday's close. U.S. West Texas Intermediate (WTI) crude oil futures were at $56.96 per barrel, up 0.9 percent.

OPEC warned earlier this week that a supply glut could emerge in 2019 as the world economy slows and rivals increase production more quickly than expected.

Of late, prices have mainly been supported by expectations that OPEC would start withholding supply soon, fearing a renewed rout.

Saudi Arabia wants the cartel to cut output by approximately 1.4 million bpd — around 1.5 percent of global supply.

In its monthly report Wednesday, IEA left its forecast for global demand growth for 2018 and 2019 unchanged from last month at 1.3 million and 1.4 million bpd, respectively, but cut its forecast for non-OECD demand growth. For H1 2019, based on its outlook for non-OPEC production and global demand, and assuming flat OPEC production, the IEA said the "implied stock build is 2M bpd."

3. Eurozone Bond Yields Back Up, But Brexit Limits Rise

Euro sovereign yields are a tad higher this morning as some stability returned to British markets following the pervious day's Brexit-driven turmoil.

Nevertheless, 10-year Bund borrowing costs are set for their biggest weekly fall in three weeks, a sign that uncertainty in Britain and Italy continued to support demand for safe-haven assets. Germany's 10-year Bund yield ticked up 1 bps to 0.37 percent.

Elsewhere, the yield on 10-year Treasuries dipped 1 bps to 3.10 percent, hitting the lowest in more than two weeks with its sixth straight decline. In the U.K., Britain's 10-year yield climbed less than 1 bps to 1.374 percent.

4. Sterling Holds On To Gains

The pound was holding on to its early Friday morning gains on the back of a radio interview with Theresa May, in which she said her deal was the best Brexit compromise the U.K. could achieve.

However, there is speculation that Conservative ministers may have enough votes — 48 are needed — for a letter of "no confidence" that would force a vote in Parliament.

5. New Zealand's Manufacturing Activity Picks Up

Data overnight showed that manufacturing activity in New Zealand recorded its highest level in four months in October.

The Bank of New Zealand-Business NZ's seasonally adjusted Performance of Manufacturing Index (PMI) rose to 53.5 from 51.7 the previous month.

This was 1.6 points higher than September, and the highest level of activity in seven months.

Related Links:

Mid-Afternoon Market Update: Dow Up 150 Points; EMC Insurance Group Shares Spike Higher

48 Stocks Moving In Friday's Mid-Day Session

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: contributor contributorsBonds Eurozone Commodities Forex Markets


Related Articles (WTI)

View Comments and Join the Discussion!
Lightning Fast
Market News Service
$199 Free 14 Day Trial
Book A Demo
Learn How You Can Succeed In The Market With Benzinga Pro

Fastest Market News

Real-Time News Alerts

Customizable News Filters

Book A Demo

Nvidia Gets Burned On Earnings: This Chart Shows More Pain Ahead

Mid-Afternoon Market Update: Dow Up 150 Points; EMC Insurance Group Shares Spike Higher