US markets are in a recovery mode. FTSE was hammered yesterday and stocks with domestic exposure were hit hard. Theresa May’s leadership is being challenged, will she survive?
U.S. futures and European markets are trading higher as investors have decided to focus on positive affairs such as the possibility of a trade deal between the U.S. and China. This is still very fragile so we are not sure if this will last. Nonetheless, the U.S. equity markets broke its 5 days losing streak last night on the back of these hopes. We saw bargain hunters jumping back in the tech sector. Apple’s stock which entered in a bear territory had some recovery but it has a long go before it gets close to its all-time high of $230.
Back in the U.K, Brexit chaos is the biggest circus of modern politics and sterling is the poison pill. Sterling’s overnight volatility is sitting at a level not over in 13 months. In fact, the pound-dollar two-month risk reversal, a gauge of market positioning and sentiment, shows speculators are still biased for more sell-off. The currency’s volatility is the same as that of emerging markets. Let’s just say that sterling is bitcoin of G10 fx basket.
If anyone wants to see the effect of disorderly Brexit, one doesn’t have to go far to look for it, just look at the FTSE. Stocks with domestic exposure were hammered yesterday. Under this uncertainty, we think that the worst days are ahead of us. This is because the chances of Theresa May surviving as a prime minister are minute, change in leadership is unavoidable now. Let’s just hope that there is only change in the leadership not change in the regime or another election (which is not due until 2022). RBS was hit hard yesterday on the back of fears that there could be a change of regime in the U.K and under Jermyn Corbyn, we could see RBS much smaller than what it is now- too big to fail theory.
U.K’s housing sector is already suffering. Even in London, the most loved city in the world, house prices have slumped and major home builders such as Berkley Group had their stock beaten down yesterday.
Businesses hate uncertainty and the current uncertainty is even more poisonous than the gas chamber’s gas. A vote of no confidence is unavoidable now and the prime minister is struggling to find a person who can fill in the role of Brexit Secretary job. Given the circumstances, it is likely that the Nov.25th summit is going to be discussing the topic of a ‘no deal divorce’.
Back in the crypto space, Nvidia produced another disappointing sales forecast and a lot of this down to the slump in the cryptocurrencies. There was a time when everyone wanted to instal a mining rig in their basement or under their desk but given the price of Bitcoin, those days are way behind us. But remember, it is only a phase because I firmly believe that good projects will survive and Bitcoin’s history shows that the currency is more adopted in the mainstream now than 10 years ago. Remember, this quarter’s sell-off is not even close enough to the sell-off which we experienced back in Q1. As long as we do not see that kind of intensity coming back in the market, I believe Bitcoin is a safe bet.
