FTSE starts week with losses as U.S. blacklists Huawei

FTSE has posted considerable losses in the Monday session. In the North American session, the pair is at 7,309, down 0.54% on the day. Risk appetite has dropped on Monday after President Trump issued an executive order to blacklist Huawei, a Chinese telecom company which is the second largest cell-phone maker in the world. On the release front, British CB Leading Index posted a gain of 0.5%, after a decline of 0.4% in the previous release. On Tuesday, BoE Governor Mark Carney testifies about inflation and the economic outlook before the Treasury Committee. The U.K. will release CBI Industrial Order Expectations.

The turmoil surrounding Brexit and global trade tensions are making fund managers increasingly pessimistic over the pound. This boosted the blue-chip FTSE last week close to 1.0%, as investors search for attractive alternatives to the pound. Major financial services companies are reducing their exposure to the pound, with some going further and shorting the currency.

Parliament is expected to vote yet again on a Brexit withdrawal agreement, after three previous attempts by the May government ended in failure. It’s difficult to see why the result will be any different this time around, as Conservative lawmakers remain deeply divided on Brexit. May tried to enlist the help of Labor leader Jeremy Corbyn, but these talks have been unproductive. The next Brexit vote in parliament will be May’s last chance before the summer recess, and her days as prime minister may be numbered.

Federal Reserve Chair Jerome Powell will speak at an event on Monday, and there are a dozen Fed speakers at various venues during the week. Still, investors don’t expect to hear anything new from the Fed, which has said that the next rate move could be in either direction. The markets have priced in a rate cut later this year, and some analysts are predicting a second rate cut before 2020. This could take dampen enthusiasm for the strong U.S. dollar, as rate cuts would make the greenback less appealing to investors.

Australian & Indian Election results provide risk-on flows on mixed Asian open

Risk Aversion Dominates as Huawei Situation Intensifies

Economic Calendar

Monday (May 20)

• 9:30 British CB Leading Index. Actual -0.5%
• 12:30 British MPC Member Broadbent Speaks
• 13:05 US FOMC Member Clarida Speaks
• 19:00 US Federal Reserve Chair Powell Speaks

Tuesday (May 21)

• 4:30 British Inflation Report Hearings
• 6:00 British CBI Industrial Order Expectations. Estimate -6
• 10:00 US Existing Home Sales. Estimate 5.35M

*All release times are DST

*Key events are in bold

FTSE, Monday, May 20 at 11:05 DST

Previous Close: 7,348 Open: 7,349 High: 7,360 Low: 7,267 Close: 7,309

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