Markets torn between Brexit and prospect of US rate hike

Stock markets were torn between the continuing fallout of Brexit and the countdown to the probable announcement of a US rate hike tomorrow evening.

Markets torn between Brexit and prospect of US rate hike

Sterling stayed higher as Scottish first minister Nicola Sturgeon signalled the start of the legal process of preparing for a second independence referendum, with the currency demonstrating a resilience to political risk that has largely eluded it since the UK voted to leave the EU.

Sterling, 2017’s worst-performing currency, climbed against all of its peers, even as the call for another independence vote threatens to further complicate the UK’s outlook as it prepares to trigger Brexit.

After rising strongly last week, the euro eased slightly against sterling, to 87.1p. The UK currency’s stability could be partially attributed to Ms Sturgeon’s timetable, according to Jeremy Stretch, head of Group-of-10 foreign-exchange strategy at Canadian Imperial Bank of Commerce in London.

The Scottish first minister said the referendum would be held between the autumn of 2018 and the spring of 2019.

In London, mining stocks stood out, said Chris Beauchamp, chief market analyst at online trader IG, helping support the Ftse despite the call for the second Scottish independence referendum.

Wall Street’s performance was, however, “distinctly lacklustre” as the US Federal Reserve decision on US rates looms closer, he said.

The S&P 500 and the Dow Jones trended lower in late trading yesterday as drug stocks fell, while investors awaited a widely expected interest rate hike tomorrow.

The 11 major S&P 500 sectors were all trading within small ranges, with the healthcare sector slipping and on track to snap a three-day winning streak. The index, which has been the second-best performer year-to-date, was dragged down by Merck and Bristol-Myers.

A report by the US Congressional Budget Office on costs associated with the Republican plan to replace Obamacare could harden opposition to the proposal, adding to the obstacles facing President Donald Trump’s first major legislative effort.

“There is a lot of uncertainty in the healthcare sector,” said Brant Houston, managing director at CIBC Atlantic Trust Private Wealth Management in Colorado.

“Until this whole debate plays out, investors are going to be a little bit concerned about how these stocks will perform,” he said.

Traders have placed a 94% bet that Fed chair Janet Yellen will announce an increase tomorrow. Her comments will be closely tracked for clues on whether the central bank could become more aggressive on rates as the US economy shows signs of improvement.

  • Irish Examiner staff, Bloomberg, and Reuters

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