Europe open – Boris, UK stocks, trade, gold, oil

Don Trumps His Pal, Boris

It’s been quite a 24 hours for the leaders of the US and UK and investors are certainly getting excited about what’s to come next.

Source – Thomson Reuters Eikon

Boris Johnson’s knockout performance in the UK election on Thursday has paved the way for the UK to leave the EU on 31 January and forge closer ties with its oldest ally. The victory exceeded expectations, with the polls having narrowed in the days leading up to the  vote and Boris now has a strong mandate to leave next month and the numbers to do so.

The exit polls gave an immediate boost to the pound which had been rising in anticipation of a majority Conservative victory in the week or two before the election. The result reduces a huge cloud of uncertainty for the UK but there’s still a long way to go, with the next phase widely being regarded as the more difficult. Still, it was a huge victory for Boris and the Conservatives and enables him to, in his words, get Brexit done.

It doesn’t take a genius to guess which companies are flying this morning after that election result. Remove the threat of nationalization and investors quickly flock back to the BT’s, Royal Mail’s and National Grid’s of the world. And there’s plenty more. Investors in these companies will be breathing a huge sigh of relief this morning.

Trump steals Boris’ thunder

Not to be outdone, Trump looks poised to sign a phase one trade agreement with China ahead of the tariff deadline this Sunday. Reports suggest a deal will delay the imposition of tariffs and halve those on $360 billion that have already been imposed. That’s a significant concession and suggests we’re about to see a major de-escalation in the trade war.

While markets are trading higher on the back of these reports, there is an element of caution about the moves we’ve seen so far. Investors have been too eager before to buy into a trade deal and may be a little reluctant to be so again but should this get over the line, this year’s Santa rally may really take off.

Gold turns south as trade deal nears

Gold is enjoying a bit of a bounce this morning after coming under considerable pressure on the back of the trade deal reports. It had previously come close to $1,490 but now finds itself closer to $1,470 having dropped as low as $1,462. Despite the bullish pressures over the last week or so, gold continues to look vulnerable and, if a trade deal is signed, that isn’t going to help it.

Gold Daily Chart

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Oil buoyed by trade reports

Oil prices are understandably on the rise on reports of a trade deal between the world’s two largest economies. Having gained so much already though over the last few months, it is struggling to scale new highs. It may get an extra lift if reports are confirmed to be true but we may see a little “buy the rumour, sell the fact” action, especially if momentum indicators don’t support any rally.

Brent Crude Daily Chart

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

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.

Craig Erlam

Craig Erlam

Senior Market Analyst - UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a Market Analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam