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News

UK stocks end mixed on new PM announcement

 

Tuesday, September 06, 2022, 8.45am GMT

The news shaping the markets today

The power line supplying Ukraine’s Zaporizhzhia nuclear power station has been disconnected to extinguish a fire. However, the plant has not suffered any damage, according to the UN nuclear watchdog. The US dollar index traded slightly higher after the news.


Australia’s current account surplus widened to A$18.3 billion in the second quarter, from A$2.8 billion in the earlier period, lending support to the AUD/USD forex pair.


The Philippines announced an annual inflation rate of 6.3% in August, matching market expectations. The news sent the PHP/USD pair higher in forex trading this morning.


UK’s retail sales grew 0.5% year-over-year in August, after a 1.6% increase in the previous month, lending some support to the GBP/USD forex pair.


Japan’s nominal wages climbed 1.8% year-over-year in July, compared to a 2% increase in June. The country’s nominal wages grew for the seventh straight month and sent the JPY/USD pair higher in forex trading this morning.

 

What’s happening: UK stocks closed mixed after the outcome of the country’s elections was announced.

What happened: British equity markets had taken a beating on Monday, shedding more than 1% before the announcement of the country’s next Prime Minister.

However, one of the major indices staged a recovery after Liz Truss was named as the new PM.

Why it matters: Liz Truss became UK’s next Prime Minister, having defeated former chancellor Rishi Sunak by a 57-43 margin in a ballot of Conservative Party members.

Truss, who succeeds Boris Johnson, is scheduled to meet the Queen today in Balmoral and will return to London to disclose her new cabinet. She will become the country’s 56th PM and the third female premier.

The new PM will be facing several economic challenges amid a continuous surge in energy prices and a higher cost of living.

The Bank of England has increased interest rates by the highest in 27 years, with markets expecting further hikes to combat surging inflation. Inflation in the country accelerated to 10.1% in July, the highest in 40 years.

Concerns around the economy have driven the British pound close to its weakest level versus the US dollar since March 2020.

On the economic data front, the S&P Global/CIPS composite PMI for the UK fell to 49.6 in August, from a preliminary reading of 50.9 and down from July’s reading of 52.1. The latest figure was the lowest since February 2021. However, UK new car registrations rose 1.2% year-over-year to 68,858 units in August, providing some support to the markets.

London’s FTSE 100 gained 0.09% to close at 7,287.43 on Monday. However, the FTSE 250, which comprises more domestic companies, dipped 1.19% to settle at 18,629.68.

Elsewhere in Europe, equity markets recorded losses on Monday after Russia’s Gazprom said it would not resume natural gas flows through the Nord Stream 1 pipeline to Germany, citing maintenance issues.

The STOXX Europe 600 index fell 0.62% to close at $ 413.39 on Monday, while the DAX 40 and CAC 40 lost 2.22% and 1.2%, respectively.

Stock markets in the US remained closed for the Labor Day holiday.

What to watch: Investors will keep an eye on plans to be announced by the new PM to address the economic crisis in the country. The release of construction PMI will also remain in focus today. The S&P Global/CIPS UK construction PMI, which declined to 48.9 in July, is expected to fall further to 48.3 in August.

The markets today

Bitcoin will be in focus today after recording losses on Monday

Context: Prices for Bitcoin moved below the $20,000 mark on Monday, while Ethereum held steady.

Details: Bitcoin, the cryptocurrency with the highest market cap, started the second week of September on a cautious note, still looking to cement the $20,000 level.

Bitcoin prices have hovered around the major $20,000 mark over the past couple of days with investors remaining concerned over the global economic outlook.

Prospects of an energy crisis in Europe and rate hikes being announced by major central banks have been the major talking points in the crypto universe.

Bitcoin traded lower to reach close to the $19,700 level, on Monday. The crypto king has lost around 18% over the past month.

Ethereum managed to hold steady ahead of the planned merger. The current Ethereum Mainnet is scheduled to be merged with the Beacon Chain proof-of-stake system. This will mark the transition of the second most-valued cryptocurrency to proof-of-stake, putting an end to proof-of-work for Ethereum. The merge is expected to lower Ethereum’s energy consumption by around 99.95%. Ethereum traded slightly higher to reach $1,580 on Monday.

What to watch: Traders expect some pickup in the overall market activity today, as US markets reopen after a three-day long weekend. Comments from some Fed officials and the release of major economic reports will also provide direction to the crypto market this week.

Other Markets: Asian indices closed mixed on Monday, with the Nikkei 225 and Hong Kong’s Hang Seng index down by 0.11% and 1.16%, respectively, and China’s Shanghai Composite and India’s BSE Sensex up by 0.42% and 0.75%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 0.9953 and 0.9964 Positive
GBP/USD – 1.1583 and 1.1593 Positive
Gold – 1729.14 and 1732.14 Positive
Silver – 18.180 and 18.268 Negative
Nikkei 225 – 27606.16 and 27647.66 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (0.9956, 0.23%) Dow ($31,454, 0.45%) Brent ($95.01, -0.8%)
GBP/USD (1.1578, 0.52%) S&P500 ($3,943, 0.48%) WTI ($88.67, 2.1%)
USD/JPY (140.50, -0.06%) Nasdaq ($12,182, 0.64%) Gold ($1,731, 0.5%)

What else to watch today

Finland’s balance of trade, Germany’s factory orders, new passenger car registrations and construction PMI, the Czech Republic’s balance of trade and industrial production, Eurozone’s construction PMI, France’s construction PMI, Italy’s construction PMI, South Africa’s consumer confidence and GDP growth rate, Taiwan’s inflation rate and wholesale prices, Spain’s consumer confidence indicator, Mexico’s gross fixed investment, as well as US composite PMI, services PMI, ISM services PMI and Logistics Manager’s Index.

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