Stocks recover from early weakness; Pound slumps to 4-month low

Summary:

• US indices recover from soft start

• Stock of the week: AbbVie

• DE30: BMW under pressure as Euro car sales drop

• Pound slumps to 4-month low as Brexit talks set to end

It’s been a topsy turvy week for US stock markets, with Monday seeing a large decline before the subsequent 3 sessions recouped the losses. There has been official confirmation from the White House this afternoon that the auto tariff decision would be delayed by up to 180 days but this is simply official notice of what has been widely known since Wednesday afternoon and one of the reasons for the rally in the past couple of sessions. The S&P500 began the US session lower by as much as 30 points, but these losses have since been recouped.

In the US, our stock of the week is AbbVie and the in-depth analysis can be viewed here.

In April we got the eight decline in car sales in a row and naturally shares of European carmakers are down this morning. One may notice that BMW shares have taken the brunt of the release in the largest extent as they are trading down 5%. In April a number of cars sold fell 0.4% in annual terms, however, this decline came partly due to a demanding base from the same time last year. In the first three months of the year car sales declined 3.5% in annual terms. Looking at the BMW weekly chart one may arrive at a conclusion that the worst may be already behind as the price is approaching the crucial technical support nearby 64 EUR per share. This level was a springboard for rises in the past, hence bulls may hope for the same this time around. If this is the case, a possible rebound could reach at least the upper boundary of the bearish channel followed by 78 EUR.

At the end of what has been a bad week for the pound, reports that Labour has called off cross-party Brexit talks will do little to help the currency’s plight as the GBP/USD rate has fallen to its lowest level since mid-January. After a strong move higher at the start of the month the GBP/USD is on track to post a 9th loss in the past 10 trading days as political concerns weigh on the pound. Part of the drop in the pair can be attributed to strength in the buck, but there has been a clear move lower for sterling with all the major currencies appreciating versus the pound in the past week.

The cross-party talks themselves always had the feel of a charade that was unlikely to provide a breakthrough about them, with both sides keen to appear that they were working on a breakthrough but the fear of giving their main rivals a helping hand in times of trouble meaning that ultimately any tangible progress was unlikely. At the same time, Theresa May is expected to set out the timeline for her departure in early June after yet another attempt to get the Withdrawal Agreement through parliament that is likely once more to come up short.