Asian Stocks Rise, UK Bugged By Politics

Asian stocks rally for the 3rd consecutive day, while British politics become turbulent

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Asia shares perked up for the third consecutive session on Tuesday as hopes for positive corporate earnings supported Wall Street.  Meanwhile, a number of high-profile resignations from the British government kept the pound restrained.

MSCI’s broadest index of Asia-Pacific shares excluding Japan gained 0.4 percent during the early trade.  This added to the 1.3 percent increase hat was recorded on Monday.

Japan’s Nikkei rose nearly 1 percent, while South Korea jumped 0.5 percent.  S&P 500 e-mini futures were steady at 0.2 percent.

Chinese shares a little bit softer.  Shanghai blue chips gained 0.2 percent after they increased 2.8 percent on Monday, recording their biggest daily increase since August 2016.

 The Dow and S&P 500 both recorded their biggest gains in more than a month overnight.  Bank shares increased ahead of the earnings reports on the latter part of the week.  The S&P banks index recorded its steepest rise since March 26. 

The Dow gained 1.31 percent.  The S&P 500 jumped 0.88 percent, while Nasdaq fetched up 0.88 percent.

“Many investors are looking ahead to second-quarter earnings season, which begins in earnest Friday… to see how the trade threat is affecting companies,” stated James McGlew, stockbroking firm Argonaut’s Perth-based analyst.

Investors have been jittery recently as the United States and China slapped tariff duties on each other’s exports.  This spurred fears that global growth will slow down, as commodities and stocks are also hurt.

Meanwhile, political problems bugged London.

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Prime Minister Theresa May’s foreign minister and Brexit negotiator resigned on Monday as a form of protest at her plans to keep close trade ties with the European Union after Britain exits the bloc.  This also stirred rebellion among their ranks.

Foreign Secretary Boris Johnson resigned just a few hours after Brexit minister David Davis resignation.  This in turn compelled some in her Conservative Party to hatch a plot to unseat her.

The political uncertainty sent the sterling stumbling as low as $1.3189 at one stage, before it somehow recovered to $1.3254.  It was last down at $1.3248, or 0.1 percent.

The markets still gravitate toward believing the Bank of England will increase rates in August, though a full-blown political crisis could change that.

“Heightened political risk at home coupled with Brexit uncertainty may prompt the BOE to repeatedly delay monetary policy normalization in 2018,” stated Lukman Otunuga, who is a research analyst at broker FXTM.

“If expectations continue to diminish over the central bank raising UK interest rates, sterling is at risk of experiencing heavy losses down the road,” he added.

On the flip side, the pound’s slump meant a rally for the US dollar on expectations that the Federal Reserve will keep raising its interest rates.

The US dollar index, which gauges the greenback’s strength against a basket of six other major currencies, recovered to 94.083 from a low of 93.713.  The US dollar of increased to 111.01 yen, from a low of 110.30.

The euro was back at $1.1755, having done with a selloff at a three-week peak of $1.1790 overnight.

 

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