Stocks remain fragile as PM May tries to delay key Brexit vote

US equites started off the week on a softer tone as investors continue to sell on any negative news. The markets were focused on Brexit news early, as Prime Minister attempts to delay a very key Brexit vote. The British pound sold off over 1% and fell to the weakest levels in almost 20 months. The vote was initially scheduled for Tuesday, but needs Parliament support to be pushed back.

US yields were little changed to slightly higher as the markets remained under pressure from geo-political events. The spread between the short-term 2-year Treasury note and the 10-year counterpart remains around 14 basis points as expectations for the December rate hike continue to fall. In recent decades, an inversion was a clear sign that US economy would enter a recession.

Last week, the market was pricing in just over a 70% probability of a 25 basis point rate hike in December, today’s implied probability is now pricing a 64.1% chance. Equities rebounded last week on expectations the Fed will reign in their tightening schedule, but stocks remain delicate to any negative story on trade wars and geo-political risks.

Price action on the S&P 500 daily chart shows today selloff made an 8-month low. Continued weakness could see price attempt to target 2545, which is the 127.2% Fibonacci expansion level of the end of October swing high. If we see a major move lower, major support could come from the 2,470 to 2,500 zone. To the upside 2,750 remains key resistance.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya