Only 30 sleeps to Christmas and 17 to the Brexit vote. We can only dream the turnout is as huge as the 71% of Hong Kong citizens who turned out, queued for hours and gave the establishment a bloody nose by rejecting the old guard. With that kind of participation and a decisive result, maybe the debate over what the British public believed or did not believe in June 2016 can be put to rest. The Hong Kong Dollar, which had been gently strengthening over the past few weeks, weakened significantly as the results were announced. Clearly no one believes this is the end of Hong Kong’s problems.
The markets largely ignored the launch of the Labour party’s big spending manifesto yesterday. A Tory majority is roughly a 2:1 bet in the financial markets, so labour’s plans are seen as a wish list which is unlikely to be fulfilled but there’s many a slip twixt cup and lip as grandmothers used to say. Hence. Sterling is pretty much where it was at the start of yesterday’s trade. That may change when we see this morning’s manufacturing and service sector PMI releases. The ‘no change’ point in these index is 50. Last month’s manufacturing reading was 49.6 and the service one was a flat 50.0. Anything above that will be good for the Pound.
As if the US and China didn’t have enough disagreements, the US Congress is condemning China’s handing of the Hong Kong protests and that has escalated tensions once again. The impact in the financial markets is a general shift of investor funds into the safety of US Treasuries; causing the 10 year bond yields to fall and, oddly, we have also seen the US Dollar weaken a tad. At the interbank level, Sterling is pushing above USD 1.29 again and the Euro is half a cent higher; just below USD 1.11.
The data diary for the US is light this week, in the run up to the Thanksgiving holiday, but some key announcements include Tuesday’s home construction figures and the Jobless Claims report due on Thursday. Housing starts showed a drop for September, which was hoped to be a temporary blip, so those keeping a close eye on the US markets will have been relieved to see a significant rebound this time around, with building permits up to the highest level since 2007.