On Tuesday, European markets settled in negative territory. The German DAX down by 0.75% with the main culprit being Deutsche Bank. The CAC 40 was also in the red, with French equities surrendering gains that came after a poll which viewed centre right politician Emmanuel Macron as the winner of the first presidential debate ahead of the upcoming elections.
Good news for the British Pound
The British pound climbed after data showed British inflation rose at the fastest pace in three years. The Bank of England's target inflation of 2% was surpassed by data showing a rise of 2.3% for the month of February. This fueled speculation that the central bank may raise interest rates earlier than expected. The news sent the British Pound surging, with an intraday high of $1.2478 against the US Dollar. A rate hike from the central bank would be beneficial for profit margins at banks.
On the other hand, shares in the U.K. market flipped into the negative territory. The FTSE 100 edged back from a record in the previous session, with only the utility sector showing gains. The decline in blue chip stock was the result of a stronger pound. A currency appreciation may lead to lower earnings and sales from overseas and multinational companies.
U.S Market
On Wall Street, U.S. markets reversed gains from the open with major American indexes trading significantly lower after there was an increased concern about the upcoming healthcare regulation. The financial sector experienced the most losses, declining almost 2% on falling US Treasury yields as House Republicans prepared to vote on repealing and replacing the Obamacare bill.
The US government bonds surged today as uncertainty over President's Donald Trump's economic policies and the outlook for interest rates in the country led some outflow from equities. Policy Initiatives may take longer to pass than initially thought, causing a slide in the US financials and a flattening of the Treasury yield curve with bond prices climbing moving opposite direction relative to yields.
Gold is up
Precious Metals traded mostly in the green with gold ticking higher despite experiencing losses in Asian trade earlier in the day. Chinese investors sold gold after its price failed to reach yesterday high, driving the price of the yellow metal downwards. However, the precious metal seemed to offset losses as a weaker U.S. Dollar drove market sentiment. At one point, spot gold gained 0.55% to trade for $1,241.10 per ounce.
This article was issued by Rodrick Duca, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.