It was a dramatic day in UK politics as the Supreme Court declared that Prime Minister Johnson’s proroguing of parliament was unlawful. 

Europe

The decision is a setback for Mr Johnson, and there were calls for him to resign, but the Prime Minister rejected such calls. Traders are very fearful of a no-deal Bexit ,so today’s news makes it a little less likely due to the speculation of a general election. Sterling has rallied against the US dollar as well as the euro, but the push higher in the pound has caused the FTSE 100 to underperform. Eurozone equities were a little higher earlier today as traders swopped in and snapped up relatively cheap stocks in light of yesterday’s major declines, but the gains didn’t last for the entire day, and they are now in the red.

Metro Bank shares have gone from bad to worse after the company decided not to pursue a bond issue yesterday. The firm needs to raise additional capital for regulatory reasons, so it originally planned to raise £250 million from a bond issues, where the yield was 7.5%, but due to the current financial climate, it decided against the move, hence why the stock has been battered today. The scrapping of an important financing operation, combined with a record-low share price is not a good look for a bank, as confidence is clearly weak.   

TUI shares had a great run yesterday on the back of Thomas Cook going into administration, and the positive move continued today. UBS upgraded TUI to neutral from sell, in addition to hiking the price target to 900p from 740p. TUI said it is assessing the impact of the Thomas Cook demise, and trading was described as ‘resilient’.

Auto Trader shares are lower on the session after UBS cut their price target for the stock to 510p from 540p.

US

The major indices are showing slight increases as traders are cautiously optimistic. The CB consumer board consumer sentiment reading dropped to 125.1, from the revised 134.2 in August. The drop in consumer confidence could be attributed to the escalation in the US-China trade dispute as the US began imposing tariffs on $300 billion worth of Chinese imports.

The CaseSchiller house price index reported that prices decelerated from the sixteenth month in a row. The housing data as wells as the consumer sentiment reading point to a cooling off in the US economy.

Wynn Resort received an upgrade from Goldman Sachs, which entailed the Wall Street titan lifting its outlook for the stock to buy from hold, as well as upping the price target from $140 to $155.

FX

The US dollar index is in the red on the back of the mediocre economic reports from the US. The large drop-off in the consumer confidence reading could be a sign that the tit-for-tat tariffs spat is hurting US consumers.

GBP/USD has pushed higher as traders feel the possibility of a no-deal Brexit has declined. Usually, political uncertainty would knock a currency, but the pound has been assisted by the speculation the UK is heading for a general election. The Supreme Court thwarted Boris Johnson’s plans to suspend parliament for a number of weeks, which has encouraged dealers to buy into sterling.

EUR/USD has been lifted by the dip in the greenback, but the euro can’t depend on the US dollar weakness forever. The German Ifo business climate reading came in at 94.6, and that compares with the previous reading of 94.3. The Ifo expectation reading slumped to a 10 year low, which gives us an indication of that to expect next month.             

Commodities

Gold has crept higher again as traders remain a little cautious about the state of the US-China trading relationship, as well as the health of the global economy. The metal often benefits from the risk-off strategies of traders, plus the slide in the US greenback is assisting gold too as commodity is traded in US dollars. Gold remains in its wider uptrend, and should it continue it might target the $1,557 area.

WTI and Brent crude have tumbled as traders remain concerned about demand levels in light of the disappointing manufacturing report from Japan overnight, as well as the dreadful manufacturing update from Germany yesterday. There is talks Saudi’s will get back to full production sooner than originally predicted, and that is a factor in oil’s decline too.         

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