Stocks and GBP both recover from recent weakness

Summary:

• Stock indices recover from Monday’s decline

• Australian stocks hit post-GFC highs

• DE30: Deutsche Bank hits all-time low

• PM May lays out new Brexit plan

• Pound bounces from 4-month low

Stock markets on the whole still lack a clear direction in recent trade, with Monday’s attempt to run lower seeing buyers step in. Longs may now have their chance to push home their advantage with several indices making steady gains on the European close.  The S&P500 has seen its trading range narrow of late with a series of higher lows and lower highs over the past week. The market is now pressing back up against the H1 cloud and a move above there could target further upside towards key longer term resistance at 2895.

While many developed stock markets remain in wait-and-see mode as investors attempt to ascertain what impact the latest trade developments will have going forward, Australian equities are attempting to break higher with the ASX200 rallying overnight to its highest level since December 2007. The benchmark has moved up to its highest level since before the global financial crisis on the back of a surprise election result and an apparent dovish shift from the Reserve Bank of Australia (RBA) with several observers now of the belief that the central bank will cut rates next month. In a similar vein to the FTSE, the domestic stock market in Australia generates a large chunk of its revenues in foreign currencies and with the Aussie dollar languishing close to its lowest level of the year this has provided a de facto boost for investors.       

Deutsche Bank is a company of note today due to the fact that investors are growing increasingly dissatisfied with supervisory board chairman Achleitner, as Bloomberg reports. As a result, some important shareholders are reportedly considering to push for Achleitner’s exit before the end of his term in office in 2022. In this regard, one needs to remember about the annual general meeting taking place on Thursday at which some pushes toward a dismissal of Achleitner may occur. Deutsche Bank shares are trading at their new all-time low on Tuesday. The steady downtrend is seen here for years and nothing suggests it may change any time soon. The first technical obstacle in case of a rebound might be localized nearby 8.90 EUR.

The pound began the day under pressure, with the GBP/USD rate dropping to its lowest level since January, but sterling has been offered a reprieve this afternoon as PM May laid out her latest Brexit plan. Leaks of the text from her speech caused a sharp move higher in the pound on the headline that MPs would be offered a vote on a 2nd referendum, but when this was confirmed by the PM the caveat that this would only occur if the withdrawal agreement bill had already passed left a feeling of an anti-climax.

Reports suggest that May was prepared to put the 2nd referendum and a temporary customs union on the face of the withdrawal amendment, but backed down after strong opposition from her cabinet. As the dust settles, it seems that in effect not much has really changed and that this is simply a desperate attempt to garner more support for the withdrawal agreement. As far as the pound is concerned, it remains on course to end the day higher but this is likely more down to an overdue bounce from oversold conditions rather than a strong fundamental catalyst for a recovery. The question now is whether the move higher is just a dead cat bounce or the start of a sustained recovery.