Market Brief: who cares about Italy, when Donald is back?

04 June 2018

If you were away on half term break with the kids and have decided to have minimal contact with the outside world, then you may not be aware that the markets were seriously spooked by a crisis in Italy.

Today's data releases
  Key levels
09:00 Eurozone Markit manufacturing PMI   Support Resistance
09:30 UK Markit manufacturing PMI
GBP/USD 1.3155 1.3378
13:30 US nonfarm payrolls GBP/EUR 1.1200 1.1624

Market overview

It’s the first day of the month and also the first day of the Investec Derby Festival. If horse racing is your thing, please send through your top tips to me, as I am off to Epsom for Ladies Day shortly. If I am lucky at the races, who knows, this might be the very last market commentary you’ll ever see from me! Wish me luck.
 
As for the markets, well if you were away on half term break with the kids and have decided to have minimal contact with the outside world, then you may not be aware that the markets were seriously spooked by a crisis in Italy. What crisis? Yes, if you care click to catch up on some of the Market Briefs from earlier in the week at the bottom of this page.
 
It’s hard to believe with GBPUSD pretty much back where we were at the start of the week and GBPEUR just a touch lower, but a large chunk of the risk off positions that we saw earlier in the week have all been reversed and now it’s time to focus once more on our good friend, Donald. Before I get on to this, in Italy 5 Star and the League have now formed a coalition government which has been signed off by the President and will be sworn in this afternoon. 5 Star and the League have stuck with their original choice of Prime Minister (Conte) that is Giuseppe Conte and not Antonio the Chelsea manager, who is apparently also looking for a new job, with the heads of the two parties to be joint deputy PMs.
 
In terms of the European markets, they are all up a touch and if it weren’t for Donald’s tariffs (more on this in a sec) could well have been higher.
 
Now for the mandatory Donald Trump paragraph - Aside from having some pictures taken with his good friend Kim in the Oval office (that is Kim Kardashian, not Kim Jong Un), he moved to impose metal tariffs on imports from Canada, Mexico and the European Union yesterday too. He announced temporary tariff exemptions would expire and the US would implement duties of 25 percent on foreign steel and 10 percent on foreign aluminium sold by select countries from June 1 (i.e. today). This has triggered a tit-for-tat trade fight, with key allies immediately announcing tariff retaliation plans. Canada’s government said it will impose tariffs on as much as C$16.6 billion (US$12.8 billion) on US steel, aluminium and other products from July 1. Mexico vowed to impose duties on everything from US flat steel to cheese while the EU said more vaguely that it would take immediate steps to retaliate. Australia's metals were granted a long-term exemption from the tariffs, after Prime Minister Malcolm Turnbull argued the US enjoyed a trade surplus with Australia, was a close ally, and that Australia's metal exports accounted for less than 1 per cent of US steel imports and contributed to American jobs.
 
In terms of yesterday’s data, it is worth noting that whilst headlines will report that UK mortgage approvals were a touch softer than expected, net UK consumer credit was quite strong and suggests that the weak Q1 GDP data may well have been affected by the Beast from the East’s snow fall after all. 

The day ahead

As for the day ahead, well US Non-farm payrolls will be the one to watch, with analysts expecting 190k jobs to have been added to the US economy last month. There is also a host of European Manufacturing PMIs that will be released as this goes to print along with the UK’s own version at 09.30 too. Later in the day, when I will be sipping on champagne counting my winnings, we have the US Manufacturing PMI 14.45, US Construction PMI (15.00) and the US ISM manufacturing index too. Lot’s to play for today, both in the markets and at the races! 

Thought of the day

It’s a grey morning so why not take a moment to focus on something uplifting. Out in the US, a Tennessee couple were left speechless when both proposed within seconds of each other. Well Jessa Gillaspie got down on one knee and proposed first which then led Becky McCabe to run back to her bag and get a box with the ring she was going to use to propose. The double proposal happened at Memphis Zoo where they had their very first date and was filmed by one of their friends. Search ‘double proposal’ on YouTube to have a look. It really is a sweet sight. Now that we’re picked up a touch, we can also look ahead to two days of the Investec Derby Festival, today and tomorrow. We have a few wannabe punters on desk such as FJ so if you fancy talking through your picks or to get ours, please give the Investec Dealing Desk a call on 020 7597 4000.

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