Reliance Trading Co. Limited – Asian Shares Rally as Pound Soars on BREXIT Update

The pound jumped and Asian shares rallied on Tuesday after the European Commission agreed to changes in a Brexit deal ahead of a vote in the British parliament on a divorce agreement.
By: Reliance Trading Co. Limited
 
 
Latest BREXIT Update Spurs Markets
Latest BREXIT Update Spurs Markets
 
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WAN CHAI, Hong Kong - March 12, 2019 - PRLog -- European Commission head Jean-Claude Juncker agreed to additional assurances in an updated Brexit deal with British Prime Minister Theresa May on Monday, but warned UK lawmakers would not get a third chance to endorse it.

Sterling, which had risen ahead of the talks between May and Juncker, extended gains in hopes the changes may be enough to sway rebellious British lawmakers who have threatened to vote down May's plan again on Tuesday.

The pound was up 0.5 percent, buying $1.3215 and taking its gains over two days to more than 1.5 percent.

A lower likelihood of crashing out of the EU with no Brexit deal could help to inject some bullish sentiment into equity markets by eliminating one of the three major concerns of global investors, alongside trade and slowing global growth, said Alison Wang, strategist at Reliance Trading.

"Take Brexit off the table and I think some of the real money flows that appear to have turned up late last week are likely to be there again. So I think it helps change the backdrop a little bit," she said.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 1.08 percent, with early gains reinforced by a rise in Chinese shares and oil companies, which were buoyed by higher oil prices.

Chinese blue chips rose 1.3 percent, extending the previous day's 2 percent gain.

Despite slowing domestic economic growth and uncertainty about the outlook for trade negotiations between China and the United States, Chinese markets have been buoyed this year by investors' expectations of more stimulus to cushion any downturn.

The CSI300 index has risen more than 25 percent this year.

But Jason Smith, market economist at Reliance Trading cautioned that the Chinese rally is "built on shaky foundations."

"The surge in China's mainland equity markets since the start of the year looks excessive, even allowing for renewed optimism about stimulus in China and the possibility of a US-China trade deal," he said in a note.

"Since we are anticipating more economic weakness in both China and the rest of the world regardless, we suspect that the Shanghai and Shenzhen markets will fall back sharply later in the year."

Australian shares were up 0.4 percent, while Japan's Nikkei stock index jumped 1.9 percent, helped by a weaker yen.

The amended Brexit deal gave a further boost to investors' appetite for riskier assets, after global equity indexes climbed overnight on gains in technology stocks and expectations of more stimulus from China.

U.S. shares rebounded from a week-long losing streak, with news that U.S. chip supplier Nvidia Corp has agreed to buy Israeli chip designer Mellanox Technologies Ltd for $6.8 billion helping to boost tech shares.

A nearly 7 percent gain in Nvidia shares helped to propel the Nasdaq Composite 2.02 percent higher, to 7,558.06 points.

The Dow Jones Industrial Average rose 0.79 percent, with gains tempered by a 5.3 percent drop in Boeing shares after some airlines grounded the company's new 737 MAX 8 passenger jet following a second deadly crash of the airliner in five months.

The S&P 500 gained 1.47 percent to 2,783.3.

RISING YIELDS

The market's turn toward riskier assets lifted yields on U.S. Treasury bonds, with benchmark 10-year Treasury notes US10YT=RR at 2.6645 percent compared with its U.S. close of 2.641 percent on Monday.

The two-year yield US2YT=RR was at 2.4998 percent compared with a U.S. close of 2.477 percent.

The dollar index .DXY, which measures the greenback against a basket of rivals, shed 0.2 percent to 97.036. But rising risk appetite weighed on the safe-haven yen, pushing the dollar up 0.16 percent to 111.37. JPY

The euro EUR was up 0.13 percent on the day at $1.1262.

In commodity markets, oil prices rose on a combination of strong demand and supply cuts by the Organization of the Petroleum Exporting Countries (OPEC).

A political and economic crisis in OPEC-member Venezuela is also seen as lifting crude prices.

Venezuela's opposition-run congress on Monday declared a "state of alarm" over a five-day power blackout that has crippled the country's oil exports and left millions of citizens scrambling to find food and water.

U.S. crude CLc1 was up 0.5 percent at $57.08 a barrel and Brent crude LCOc1 was 0.4 percent higher at $66.84.

Spot gold XAU= jumped 0.2 percent to $1,296.45 per ounce.

About Reliance Trading Co. Limited

Experienced, local and independent, we have deep knowledge of markets and what causes change; we have local roots in Hong Kong but maintain a global reach and worldview; and we're a truly independent business which allows us to give you sound investment advice based on facts, not spin.

We started with one goal in mind: provide custom investment portfolios to fit your specific investment needs. Our client's love that we're able to tap into all of the same data, information and resources as larger investment houses, all the while offering a bespoke service to each and every client, as their situation requires.

Visit www.reliancetradingco.com to view our products and services, or contact us at info@reliancetradingco.com to discuss your wealth management future.

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