Stocks seek to extend recovery; GBPUSD near 3-week low

Summary:

• FTSE little changed after bullish outside day

• Barclays gains despite unwanted attention

• German Dax continues to probe rising trendline

Global stock markets are seeking to build on the recovery which began yesterday as equities look to regain a surer footing after the sizable selling seen on Monday. The FTSE is little changed on the day after adding 80 points yesterday as investors await the next move after the recent additional tariffs from both the US and China have weighed on risk sentiment. The pound is little changed on balance overall, although it has dropped down close to a 3-week low against the US dollar just above the $1.29 handle as the buck has benefitted from some recent safe-haven flows.     

The FTSE printed a bullish engulfing candle yesterday after the market has fallen around 400 points in just over 3 weeks. 7135 a level to watch below. Source: xStation

BoE warns on Barclays charge

In a move that will likely draw criticism from many, the Bank of England has warned prosecutors that a criminal charge against Barclays could threaten the banks existence. The bailout of large banks in the wake of the 2008 financial crisis because they were “too big to fail” received widespread condemnation and these latest revelations suggest that central banks continue to believe that a safety net should be offered to lenders regardless of their business practices. Sources report that in 2017 the BoE’s top banking supervisor, Sam Woods, the director of the Serious Fraud Office, then David Green, that if charges relating to payments made to Qatar in the last crisis were brought about then it may present an existential threat. The news has had little impact on the stock price of Barclays today, with shares rising just under 1% although they remain not far from their lowest level in 3 months.        

German GDP bounces back in Q1

After escaping a technical recession in the final two quarters of 2018 by the skin of its teeth, there’s been some better news on the German economy for the start of the year with the preliminary GDP reading showing 0.4% growth. While this reading is far from stellar it does represent a significant improvement on the 0.0% print for Q4 2018 and supports the notion that the EU’s largest economy has recovered after a sticky spell. Having said that, the economy is far from out of the woods and the recent escalation in US-China tariffs could well have an impact on Germany with the country’s sizable automobile sector in the crosshairs of a protectionist Trump. The US President has an 18th May deadline to act on an investigation into the impact of car imports on national security and given his recent zeal to revive trade tensions, it would not come as too much of a surprise if Trump slapped tariffs on German carmakers in the not too distant future. The German stock market is trading a little lower on the day despite the GDP print, with the DAX 30 down by 0.2% at the time of writing.   

The German Dax bounced from the bottom of a rising trend channel yesterday but has drifted lower once more this morning. 11835 seen as potentially key support. Source: xStation