European Open Market Briefing – 09/06/2017 – by Arjun Lakhanpal

In Asian Equity Markets stocks were mixed, but UK-exposed stocks were down across most markets.  Hong Kong’s Hang Seng was down 0.3 per cent. Among the worst performers were UK-exposed businesses owned by billionaire Li Ka-shing, with Power Assets down 1.4 per cent, Cheung Kong Infrastructure off 1.8 per cent and CK Hutchison down 1.3 percent. Those offset gains of 1.6 percent by Chinese tech giant Tencent. In Australia the S&P/ASX 200 was up 0.2 percent, but energy stocks continued to reel from falling oil prices and the sector was down 1.5 per cent. Shares in Woodside Petroleum were off 1.5 per cent, while Caltex Australia had shed 1.3 percent. The Nikkei 225 was up 0.8 per cent, thanks in large part to gains of 7.9 percent from SoftBank.

In Currency Markets the pound is hugging its lowest level in a month on Friday after the UK’s general election looks set for a shock hung parliament.  The pound suffered in Asia’s morning trade, down 1.4 per cent against the dollar at $1.2775, regaining some of its footing having fallen as much as 2 per cent earlier in the morning. Sterling was down 1.3 per cent against the euro at 0.87704, Japan’s yen at 140.671 and the Australian dollar at $1.6942. Investors have been selling the UK currency as results trickle in from the general election which only a month ago had predicted a comfortable victory for the ruling Conservative party. The Tories are still on course to be the largest party in parliament but could fall short of an overall majority.

In Commodities Markets oil prices continued to slide on Friday, adding to sharp declines from earlier this week as evidence mounted that a fuel supply overhang continued despite an ongoing effort led by OPEC to tighten the market by holding back production. Brent crude futures were trading at $47.67 per barrel down 19 cents, or 0.4 percent, from their last close. That puts Brent 12 percent below its opening level on May 25, when an OPEC-led policy to cut oil output was extended to cover the first quarter of 2018. U.S. West Texas Intermediate (WTI) crude futures were at $45.44 per barrel, down 20 cents, or 0.44 percent, from their previous close. They are down over 11 percent from May 25.

In US Equity Markets the S&P and Dow industrials ended flat as former FBI director James Comey said President Donald Trump fired him to undermine an investigation into Russian meddling into last November’s U.S. election. The Nasdaq Composite posted a record closing high boosted by gains in Nvidia and Yahoo.  The Trump ‘reflation trade’ that favored banks and sectors linked to infrastructure spending, among others, was back Thursday, with the S&P 500 financial sector up 1.1 percent. The S&P 1500 construction and engineering index rose 1.4 percent and a gauge of construction materials’ stocks added 1.5 percent. The S&P 1500 steel sector index jumped 4.1 percent, the most since April 20.

In Bond Markets prices on U.S. 10-year Treasury futures rose after an exit poll showed the ruling Conservative Party would fail to secure a parliamentary majority in Britain’s election. This stoked concerns about the path of the U.K. government to negotiate its exit from the European Union, spurring safe-haven bids for U.S. government bonds. The yield on 10-year Treasuries rose 2 bps at 2.19 percent. Benchmark U.K. gilt yields rose three basis points to 1.03 percent on Thursday, underperforming European peers. German bund yields fell one basis point to 0.25 percent.