Anglo-Russian relationship intensifies, as May points at Putin’s government to blame for the nerve attack
It was a very mundane Monday with no headline data hitting the wires. Instead the focus was very much on Brexit and Anglo Russian relationships. PM May said Monday that Russia was "highly likely" responsible for the attempted murder of former Russian double agent Sergei Skripal. May has also demanded that Russia provide "full and complete disclosure" or explanation by end of Tuesday.
On the Brexit front it was reported the Junior Brexit Minister Walker that the United Kingdom is very close to agreeing on the details regarding an implementation period with the European Union for its transition out of the European Union. However, it was later reported by ITV’s Robert Preston that PM May is set to concede to the EU demands that a full exit from transitional period will end on 21st Dec 2020; earlier than hoped.
Pound Sterling – UK Markets
The Pound to Euro rate remains steady, exchanging at €1.12. Sterling also remains steady against the US Dollar, with the exchange rate keeping at $1.38.
Much of the focus in the UK this Tuesday will be on the inaugural Spring statement, which will be released at 12:30pm. This event has been downgraded following the appointment of Hammond as the main Budget statement now takes place in the autumn. Under the law, the Office for Budget Responsibility, is mandated to produce two forecasts for borrowing and growth a year, one in the Spring and one in the Autumn; as a result, the focus will be on their forecast.
What to expect from the statement:
It has been quiet in light of the event happening globally with not much, is the steer from the Treasury.
• No tax changes.
• No spending announcements.
• Perhaps the launch of some consultations on addressing long-term fiscal challenges.
• FOCUS will be on new fiscal and economic forecasts from the Office for Budget Responsibility
likely to show a downward revision of borrowing forecasts.
OBR document will also, for the first time, include an estimate of the annual cost of the post-2019 Brexit divorce payments to the EU agreed, in principle, by the Prime Minister in December.
US Dollar – US Markets
The Euro remains steady against the US Dollar, exchanging at $1.23. The US Dollar Index (DXY), which measures the strength of the Dollar against six major competitor currencies, sits at 89.99.
In the US, the market will keep a close eye on February’s consumer price report (inflation). The headline CPI rise to 2.2 per cent year on year, up from 2.1 per cent the previous month. A pickup in inflation could result in an acceleration the pace of rate tightening. The FOMC meeting is next week.
In other news, a top Exxon Mobil Corp official has confirmed that a multi-billion dollar plan is under consideration, which aims to double US light crude oil refining capacity along the US Golf Coast, as the nation’s shale oil production grows. Exxon are planning to add a crude distillation unit (CDU) at its 362,300 barrel per day Beaumont refinery, as well as boost refining capacity at plants in Baton Rouge, Baytown and Louisiana. While their Texas refinery would be set to become the nation’s largest by capacity when the works are finished within the next decade. Analysts expect US crude oil production to grow by 4 million bpd by 2023.
Euro – European Markets
The Euro remains steady against the Pound, with the exchange rate now at £0.88.
Tuesday saw European shares edge higher, as investors were waiting for the latest inflation figures from the US. The STOXX 600 gained 0.1 percent, while Italian and Spanish stocks rose 0.3% to 0.4%. Surprisingly utilities were the best performing sector a second day straight by German utilities RWE and E.ON to share the assets of power utility Innogy.
E.ON was a sitting at the top of the STOXX 600 this Tuesday morning, as its shares gained 4.4% after its results. The company announced that they would raise its surpluses for 2018 and 2019.
Spain has seen a slight change inflation rate, as consumer prices rose 1.1% year-on-year in February of 2018, following a 0.6% gain in the previous month and confirming the market expectations. Cost progressed faster mostly due to higher prices of electricity compared to a drop in the same month a year earlier.
Industrial production in Slovakia increased 2.2% year on year in January of 2018, following a wrongly revised 0.1% in the previous month and beating market expectations of a 0.6% gain.
Other Currencies – Highlights
The Sterling remains steady against the Australian Dollar, with the exchange rate at 1.76 AUD.
The Pound has increased against the Japanese Yen, which now stands at 148.55¥.
The tensions between China and the US continue to grow, following US President Donald Trump’s block on Broadcom Ltd.’s striking 17 billion bid takeover deal of Qualcomm Inc., which reflects growing concerns about China’s rising economic dexterity. Huawei Technologies Co., the world’s third largest maker of smartphones and perhaps telecommunications equipment, were behind the efforts for this acquisition. Committee on Foreign Investment in the US advised Trump that the deal was posing national security risks.
Recent data shows that February saw the NAB business confidence index in Australia drop to 9 from a downwardly revised 11 in January, in line with market accord. This was the lowest reading since November 2017 amid current financial market instability. However, the figure persisted to stay above average and is likely to recover if volatile tensions pass.