Stocks in Europe opened higher on Monday bolstered by a rise in the price of oil and a bounce-back in European banking shares with the exception of HSBC which reported disappointing full-year earnings.
Some of the biggest swings came in the currency market. The British pound was sent reeling after popular London Mayer Boris Johnson backed the campaign for Britain to leave the EU. Boris is one of the few British politicians liked by the British public and is a significant coo for the “Out” campaign. The odds of a Brexit has shifted a few percentage points with Boris on the “out” side.
The reaction has been concentrated within the currency market since the Bank of England is now almost guaranteed not to raise interest rates in the first half of 2016 before the vote. The fact that gilt yields are flat and UK stocks are higher would suggest Brexit fear has still not really taken hold. The vote is still four months away, and despite Mr Johnson’s addition to the “out” campaign, the likelihood is that Britain will vote to remain in the EU.
Banking shares were mostly higher as sentiment towards the sector continues to improve from last week, while HSBC bucked the trend, sitting at the bottom of the FTSE 100. The Anglo-Asian bank reported a surprise loss in the fourth quarter, leaving annual earnings below expectations at just 1% higher. HSBC’s earnings miss was a surprise but the causes were not. Increased costs from bad loans concentrated in Oil and Gas and low net interest income because of lower interest rates are familiar concerns.
The possible sale of the De Beers London headquarters has helped Anglo American to the top of the UK benchmark equity index as investors welcome the mining company slimming down to match lower demand for its commodities.
US stocks look set for a stronger open in line with higher oil prices and positive trading in Europe ahead of the release of Markit’s manufacturing PMI for February.
USA pre-opening levels
S&P 500: 24 points higher at 1,941
Dow Jones: 199 points higher at 16,590
Nasdaq 100: 53 points higher at 4,217
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