Summary:
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GBP choppy as UK PM May sets 7th June leave date
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US stocks look to recover into the weekend
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More soft data from the US
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DE30: Deutsche Bank Chairman retains jobs
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Oil set for large weekly loss
Theresa May has announced that she will step down on Friday 7th June as the PM has confirmed the end of her tenure. There was a small move higher in the pound in response with the GBP/USD moving back above the $1.27 handle but these gains have since been pared somewhat and the focus now very much shifts to her replacement who could be in place as soon as the middle of July. The news itself is not really that positive for the pound in that the next Tory leader will likely take a more hardline approach to Brexit and as such the chance of a no-deal outcome has increased.
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After some pretty heavy selling yesterday, US stock markets began higher this afternoon as equities have moved off their lows. The recovery can be attributed in part to comments from the US president after Trump told reporters late on Thursday that he expected the ongoing trade war with China to end swiftly. While these remarks are vague and could well amount to little more than lip-service they have boosted sentiment and all the major US indices are trading in the green around the time of the European cash close.
An unexpectedly soft US manufacturing release yesterday saw a bad session turn worse for the markets and the last significant data point of the week has done little to improve things on this front. For April durable goods orders came in worse than expected with a M/M decline of 2.1% vs -2.0% expected. The core reading didn’t look too bad on the face of it, with a print of 0.0% vs +0.1% consensus forecast, but this appears worse when the downward revision to the prior is taken into account to now stand at -0.5% after +0.2% initially. Durable goods orders continued to decline last month, with this widely followed metric on consumer spending turning negative in Y/Y terms.
Deutsche Bank (DBK.DE) held Annual General Meeting yesterday. The event was particularly important as there was a lot of discussion about potential ousting of the Chairman, Paul Achleitner. Voices of dissatisfaction echoed throughout the Meeting but at the end Achleitner retained his job. Achleitner secured support of 72% shareholders, solid result but lower than last year’s 84%. On the other hand, investors were offered more assurances that the turnaround is coming and that the management is ready to make significant cutbacks. However, a few shareholders warned that they will withdraw support for both Achleitner and CEO Sewing in case the Bank further struggles to improve results.
The oil price is attempted to recover this morning after its biggest loss of the year so far, with Brent crude tumbling more than 5% in Thursday’s session, but as the day’s trade has worn on the gains have been erased. The week had started brightly for oil, with the market jumping after comments from the Saudi energy minister which suggested the kingdom were willing to extend their production cuts, but the early promise has fizzled out and the size of the recent declines reveal an underlying fragility to the market. The plunge lower began on Wednesday afternoon when the US inventory reading rose for the 7th time in the past 9 weeks, suggesting that despite rising geopolitical tensions the market remains well supplied for now. The lion’s share of the focus has been on the supply side of the market due to fears of shortages but the demand side shouldn’t be overlooked, with the disappointing manufacturing figures from both the Eurozone and the US raising doubts about the health of the global economy and no doubt playing a part in the sell-off.
