EUROPEAN SHARES-European benchmarks are being weighed down

Stocks drifted lower on Wednesday, despite bets on further US stimulus driving most Asian stocks and US Future contracts higher overnight. Investors were pleased to see the US House of Representative speaker Nancy Pelosi maintaining her “hopes” of a compromise on the next stimulus plan before the end of the week. However, while this has helped to sustain market sentiment on a very short-term basis, most investors have already priced this into their trading with any failure to deliver the plan by the end of the week likely to trigger sharp moves down on riskier assets. European benchmarks are being weighed down by both the healthcare and energy sectors this morning with traders cautiously waiting for corporate news as well as the US Crude Oil Inventories data later in the afternoon. Today’s brings earning reports from TechnipFMC and Worldline as well as results from Verizon and Tesla in the US.

The FTSE-100 index is one of today’s worst performers so far after investors’ appetite decreased amid difficult Brexit talks with the EU that are now set to continue into next week at least, if no agreement is reached between the two blocs before Friday.

FOREX- clear indication that investors are for now dismissing a no-deal scenario

The pound gained more than 0.5% versus both the dollar and the euro during early Wednesday trading, a clear indication that investors are for now dismissing a no-deal scenario. As reports emerge that UK and European officials will reignite talks, the markets have strengthened their belief that the British government’s stance of preparing for no-deal was nothing more than strategic positioning with an eye on continuing negotiations.

EUROPEAN SHARES -Covid-19 infections has made investors expect further government support

European stocks edged higher on Monday, alongside Asian shares and US Futures, despite mixed macro data from China. Positive talks between US officials about a “possible” stimulus deal prior to the elections has been sustaining market sentiment this morning but it wasn’t just that. Acceleration in the number of Covid-19 infections has made investors expect further government support on a short-term basis and it seems they are already pricing that in, with the nature of the support depending on who wins the upcoming presidential election. European investors remain focused on Brexit with surprisingly positive developments to start the week with the UK Parliament potentially forcing Prime Minister Boris Johnson to rewrite or reconsider its Internal Market Bill. This may revive stalling talks with the EU bloc after investors were disappointed to see Boris Johnson ready to walk away from the table without any deal. However, despite this early positive trading mood, investors will remain cautious and monitor corporate news as the earning season continues. All European benchmarks are trading higher, led by insurers and the banking sector, with the French CAC-40 the best performer as the market now heads up towards 5,000pts.

GOLD-The countdown clock is running down quickly with both Brexit and the US election

The countdown clock is running down quickly with both Brexit and the US election getting ever closer to an end (at least for US elections). Despite this, we are not yet seeing risk aversion on the markets with stocks continuing the rebound started on Friday. Bullion has also started the new week in green with the spot price again approaching $1,910. A clear climb above $1,925-$1,930 would open space for further rallies, while the scenario remains mostly unchanged so far with the long-term bullish trend untouched, while in the short term we are living a lateral phase in the big trading range $1,850 and $2,070. As mentioned, we have some intermediate levels, at $1,930 and $1,970 (resistances) and $1,885 and $1,872 (supports).

FOREX-The pound is on the front foot in relation to the other major currencies

The pound is on the front foot in relation to the other major currencies at the start of the trading week. Sterling gains versus the euro and the dollar are particularly significant as it shows the markets are dismissing the British government’s rhetoric that negotiations with the EU are over and the future trade relationship will be based on WTO terms as a bluff. If investors’ stance in relation to sterling is anything to go by, then negotiations are far from over and the chances of a deal between the two parts being reached are reasonably high.

EUROPEAN SHARES-Investors are still digesting the latest set of Covid-19 restrictions

An optimistic wind blew over European assets shortly after the opening bell on Friday morning, with almost all benchmarks climbing higher. Today’s risk appetite for European stocks has been boosted after investors welcomed positive developments on the corporate front. Optimism is particularly prominent in the automotive and engineering sectors after both Volvo and Thyssenkrupp reassured investors with their past performances and short-term outlooks. However, traders are still likely to face a “not-so-easy” trading session today as many uncertain market drivers remain. Investors are still digesting the latest set of Covid-19 restrictions in France and the UK with lingering concerns they may severely impact an already fragile recovery. Furthermore, volatility is likely to be on the rise today for UK shares, not only because of the expiry of options, but also because of Boris Johnson’s potential decision to walk away from the Brexit negotiation table with the EU.