Rebounding US manufacturing helped US shares advance at the start of the new quarter. The S&P 500 surged to its highest level since October while stocks across Asia also rallied on Tuesday, setting European indices up for a positive start.
A jump in US manufacturing came following an unexpected improvement in Chinese manufacturing data earlier in the day. Traders are growing increasingly optimistic that the world’s two largest economies are starting to stabilise, amid better recent data prints. US treasury yields increased by the most in three months following the double whammy of stronger manufacturing data. Yields on 10 year bonds have now gained considerably since their inversion just a week or so go.
Oil approaches $62
Oil has been a noticeable winner of easing global growth concerns, hitting fresh year to date highs. The black stuff rallied 2.3% in the previous session and was extending those gains in early trade on Tuesday. Investors were also cheering the prospect of further output cuts following encouraging remarks from Iran. Crude stockpiles will now be in focus, to assess the potential threat on oil prices.
Brexit crisis deepens hitting the pound
The pound fell sharply overnight as Parliament continued with its indecision. None of the softer Brexit options voted on in the House of Commons as an alternative to Theresa May’s Brexit plan managed to achieve a majority. This basically casts an even greater shadow over an already very grey situation. With just 10 days to go until the UK leaves the EU, ministers failing to agree to an alternative plan increases the probability of a no deal Brexit. This fact is being reflected in a weaker pound.
Theresa May will hold a long cabinet meeting today whereby the PM and her cabinet will thrash out what's next for Brexit. There are suggestions that Theresa May could put her Brexit deal up for a fourth vote in Parliament. Should it fail, she will have to make some tough decisions. This includes making a choice between, no deal Brexit, a long delay Brexit, a second referendum or a general election. Whichever option she chooses, Theresa May is in danger of alienating cabinet members.
Euro hovers around $1.12
The euro once again extended losses overnight and was falling in early trade on Tuesday, putting it on track for just one positive session in the last 10. The eurozone is stacking up to be the weakest link. Whilst China, UK and the US impressed with higher than expected manufacturing numbers, the Eurozone manufacturing data was dire again. Throw into the mix declining inflation levels for the region and traders are struggling to find a reason to buy into the common currency.