Markets Traded Lower: Should You Worry?

  • Jan 16, 2019 GMT
  • Team Kalkine
Markets Traded Lower: Should You Worry?

The global markets are dealing with several macro-economic issues which have been impacting the market players’ sentiments. The US markets are busy with the earnings reports and are dealing with the news related to trade wars. However, it can be assumed that the tensions related to the European markets have further increased. At the time of writing, the European Markets were trading in the lower range largely because of the voting out over the Brexit deal proposed by the UK’s Prime Minister, who did not find support at Parliament.

On the global front, the Chinese officials had stated that they would be adopting certain steps which could support the broader Chinese economy. It can be assumed that adoption of the measures to help the Chinese economy is very crucial at this stage largely because of the growing uncertainty about the financial markets as well as increased worries about the global economic downturn. US Bond yield were up post the release of import/ export price data.

During the day, the FTSE 100 Index traded in red and was down by 0.53% while STOXX 600 was trading marginally higher at 350.00 implying the rise of 0.46%. There are expectations that the impact of the news related to the Brexit could also impact the currency. Therefore, it can be said that the investors need to be patient when making the deployments of any capital. Office for National Statistics (ONS) reported inflation rate of 2.1% in December, falling from 2.3% in the previous month. The figure is near the target 2% inflation rate decided by Mark Carney, Governor BOE. It indicates that members of monetary policy committee are less likely to consider any near-term hike in the interest rate. The reported inflation rate was in line with the market experts’ expectations. The pound remained up on Wednesday after a plunge overnight when MPs of UK House voted down Theresa May’s deal heavily. Margin of Theresa May’s defeat came as a surprise, but the defeat itself was discounted by the market for a long time. GBP/USD was trading at 1.286 by 02.21pm GMT, after falling as low as 1.2667 late Tuesday. The market is now discounting delay in Brexit which is scheduled on 29th March, and possibilities for extension of Brexit date is more likely. In longer run it may create two possible scenarios – leave EU with no deal or stick with EU.

Meanwhile, at global front, Goldman Sachs (GS) surged significantly after reporting good quarterly revenue, while Bank of America (BAC) surged 7.16% (16 Jan 2019) after reporting quarterly profit that beyond estimated growth in loan book. Deal in fintech sector drove the Wall Street, with strong earnings posted by Goldman Sachs and Bank of America also boosting the scenario.

London stock exchange listed entities, like Persimmon Plc (PSN), Taylor Wimpey Plc (TW) and Legal & general Group Plc (LGEN) were among the top gainers on FTSE 100 index and up by 5.41%, 5.1 and 3.51%, respectively after market close. Top laggards included Pearson Plc (PSON), Reckitt Benckiser Group Plc (RB) and EVRAZ (EVRE.L), down by 6%, 4.4% and 3.6% respectively.

On January 16, 2019, FTSE 100 Index closed at 6,862.68 (down by 0.47%).

With Bank of England reducing the interest rates to a historic low level, the spotlight is back on diverse investment opportunities. 

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