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A general sense of malaise...

Published: Thursday 25 October 2018

  • Yen and Canadian Dollar riding high through market panic
  • Surprisingly welcoming reception for UK Prime Minister in times of doom and gloom
​​By Michael Hart

Asian stocks have joined a global sell-off after a bruising session on Wall Street, which saw two of the three main indexes erase their gains for the year. Tokyo stocks slumped more than 3%, while losses pushed the Dow Jones and S&P 500 into negative territory for the year. The main concerns are over corporate profits and slowing growth, which have rattled investors. It was the worst day since 2011 for the index, which is now 10% lower than its September peak. Even technology firms, which have driven much of the market gains this year, did not escape the sell-off, with Amazon falling 5.9%,
Other reports suggesting that the US housing market is also weakening are also a worry, given the sector is seen as a bellwether of economic health by many. Investors have also grown nervous as growth in China slows and companies report increased costs due to labour shortages and tariffs.
Adding to the sense of unease were a series of crude mail bombs and suspicious packages sent to prominent Democrats and critics of President Donald Trump, including Barack Obama and Hillary Clinton, less than a fortnight before the midterm elections.
Yen and Canadian Dollar riding high through market panic
In the currency markets, the Yen is trending higher on risk aversion from this uncertainty, as investors flock to safe havens. The Canadian Dollar is also strengthening, as it’s still feeling the support from the interest rate hike yesterday. The bank’s rate is now set at 1.75%, the highest it has been for 10 years. Economists are expecting more hikes, even though the Bank of Canada stated that they want to wait and see how current rates affect the economy before raising again.

Surprisingly welcoming reception for UK Prime Minister in times of doom and gloom
UK Prime Minister Teresa May emerged unscathed from a showdown with the powerful 1922 committee. Mrs May made an emotional speech and it seems that she has won over the majority of the committee, making it less likely that she will face a leadership challenge in the near term. British business fear that they will "pay the price" of a no-deal Brexit because complicated new border controls may not be ready in time, a government watchdog has warned. The National Audit Office stated concerns that thousands of UK exporters would not have enough time to prepare for new border rules, leading to severe disruption in supply chains. Adding to the sombre mood, British department store chain, Debenhams, announced this morning that they will be closing 50 stores nationwide. Sterling is still languishing against the US Dollar and Euro, with little to support the UK currency at this time.

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Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 12:45 European Central Bank Main Refinancing Rate 0.00% 0.00%
EUR 13:30 European Central Bank Press Conference     
USD 13:30 US: Durable Goods Orders 4.4% -1.3%
USD 13:30 US: Core Durable Goods Orders 0.0% 0.5%
USD 13:30 US: Unemployment Claims 210k 214k
USD 15:00 US: Pending Home Sales -1.8% -0.1%

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