Top 5 Things to Know in the Market on Thursday

Published 28/11/2019, 12:24
© Reuters.
- -- Quiet descends on global markets as the U.S. celebrates Thanksgiving. Asian and European markets stutter after President Donald Trump signs into law the bill supporting Hong Kong's pro-democracy movement, on fears that it will further delay meaningful detente on trade. Elsewhere, Britain's Conservatives look on course for a resounding win in the general election in December, and the euro zone's economy looks more and more like bottoming out. Here's what you need to know in financial markets on Thursday, 28th November.

1. Trump signs Hong Kong bill

President Donald Trump signed into law the Hong Kong Human Rights and Democracy Act, effectively putting China’s treatment of pro-democracy protests at the heart of U.S. trade policy toward the country. Trump also signed an order banning the export to China of crowd control munitions such as tear gas.

The move threatens to further complicate trade negotiations, given Beijing’s sensitivity to what it considers an infringement of its sovereignty. However, it comes after a week that showed the U.S. economy withstanding the pressure of the trade war better than China’s.

While Beijing repeated its condemnation of the bill and threatened countermeasures, it has so far not taken any action.

2. Global stocks stall on fear of new delay to trade deal

Global stock markets retreated after seeing another hurdle raised to the oft-promised-but-never-delivered ‘phase-1’ deal on trade between the U.S. and China.

The Euro Stoxx 600 had closed on Wednesday within 1% of its first all-time high in four and a half years but fell 0.2% at the open and drifted sideways from there. The Shanghai Composite composite index fell 0.5%.

By 6 AM ET (1100 GMT), Dow futures were down 83 points or 0.3%, while S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.3%. All cash stock and bond markets in the U.S. will, however, be closed for Thanksgiving.

3. Pound rises as Conservatives close in on U.K. election victory

U.K.-focused assets rallied after a much-anticipated opinion poll by YouGov showed the Conservative Party on course for its biggest election victory in over 30 years.

The YouGov poll predicted a Tory majority of 68 seats in the new parliament. That’s big enough not only to ensure the passage of Prime Minister Boris Johnson’s EU Withdrawal Bill, but also arguably big enough for him to face down hardline Brexiteers who will be expected to press for a thorough rupture with the EU’s standards and regulations as the U.K. negotiates its future trading arrangements.

The pound hit a six-month high against the euro on the news, but failed to make fresh highs against the dollar, where it remains firmly capped below $1.3000. The FTSE 100 fell 0.4%, but the more domestically focused FTSE 250 rose 0.2%, while the 10-year Gilt yield fell three basis points to 0.63% before bouncing a little.

4. Indian Supreme Court rattles telecoms sector

One of the world’s biggest telecoms market was thrown into turmoil as India’s Supreme Court ruled that the country’s leading network operators must pay the government an extra $13 billion in network-related fees.

The ruling threatens the viability of the three biggest carriers in the country – Bhati Airtel and Vodafone Idea. Vodafone (LON:VOD) in the U.K. fell over 3% on the news.

The government of Prime Minister Narendra Modi has signalled that it may offer the operators relief, possibly in the form of deferring payment for new spectrum rights. Analysts see that as a preferable political alternative to the loss of competition that would follow the collapse of Bhati and Idea.

5. Euro zone close to bottoming out

There were fresh signs of a bottoming out in the eurozone economy as the European Commission’s economic sentiment index, which includes both business and consumer sentiment, rose more than expected to 101.3 in November.

In addition, the European Central Bank said M1 monetary growth, one of the more reliable leading indicators of the economy, increased to an annual rate of 8.4% in October, from 7.9% in September.

Preliminary German consumer inflation data for November avoided any negative surprises, although the same could not be said for Italy’s producer prices, which fell at their fastest rate in over three years in October.

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