Pound lower as UK and EU make little progress in talks

Pound lower as UK and EU make little progress in talks 150 150 Realm

Ahead of Thursday’s deadline for a deal between the UK and the EU over the terms of their relationship post-Brexit, there appears to be little progress. Michel Barnier, the EU’s chief negotiator, said their was insufficient progress for them to enter the final intensive phase of the talks and the UK is “ready and willing” to exit without a deal. 

 

Global Macro

  • Wall Street closed in the red on Tuesday and the Dow snapped a 4-day winning streak. On corporate news, shares of Apple dropped after the company unveiled its new iPhone 12 with 5G and disappointed expectations. On earnings, JPMorgan Chase beat expectations. On the policy front, Nancy Pelosi said she had no intention in meeting Senate Republicans in the middle absent sufficient offers on health-care issues. On the macro side, the IMF warned of a “sharp adjustment” in financial markets despite revising its global growth forecast to -4.4% in 2020 from -4.9% in June, as GDP in advanced economies is now projected to drop 5.8% this year compared to -8.1% in June. Meanwhile, growth for emerging markets was revised to -3.3% from -3.1% for 2020, mainly explained by India’s sharp contraction. The Dow Jones lost 158 points or 0.6% to 28,680. The S&P 500 declined 22 points or 0.6% to 3512. The Nasdaq dropped 12 points or 0.1% to 11,864.
  • The Dow Jones and the S&P 500 were set to snap a four-day winning streak as news of the continuing gap between Republicans and Democrats over fresh fiscal stimulus rattled sentiment. At the same time, third quarter earnings season has begun on Tuesday morning with JPMorgan Chase, Johnson & Johnson, Citigroup, and BlackRock all reporting betterthan-expected results. Meanwhile, tech-heavy Nasdaq Composite seesawed between small losses and gains as investors rotated out of economically sensitive cyclical stocks into big tech names.
  • The FTSE 100 lost more than 30 points or 0.5% to close at 5,970, as concerns about the economic impact of new coronavirus restrictions mounted, while investors await new developments on Brexit ahead of Thursday’s EU summit. Britain’s government imposed a tiered system of further restrictions on parts of England, including closing several business activities in Liverpool. At the same time, a weak jobs report released earlier in the session hit sentiment. Data showed the UK unemployment rate rose more than expected to a three-year high in the June-August period, before the end of the government’s job protection scheme. On the corporate front, clothing retailer French Connection Group tumbled 20% after posting a plunge in sales in the first half of the year.
  • The dollar index strengthened to near 93.5, moving away from 3-week lows in the previous session, as the earnings season in the US kicked-off and investors await any progress on a new stimulus bill. The Trump administration called on Congress to pass a simpler bill using leftover funds from an expired small-business loan program, after the near $1.9 trillion proposal hit resistance from both Democrats and Republicans over the weekend. Also, Joe Biden is seen beating President Trump in the November 3rd presidential election, raising hopes of a large stimulus plan. Meanwhile, the IMF sees the US economy shrinking 4.3% in 2020, much less than an initial estimate of an 8% back in June.
  • On Tuesday: European stocks drifted down to a weak close on as worries about growth amid continued surge in coronavirus cases in several parts across the continent, and some none-too encouraging earnings reports and economic data weighed on sentiment. US stocks moved mostly lower during trading, giving back ground following the strong upward move seen over the past several sessions. The Dow and the S&P 500 remained stuck in negative territory throughout the session, while the Nasdaq spent the day bouncing back and forth across the unchanged line.

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