Global Market Report - May 23, 2018

Europe

The UK pound has been struggling in recent weeks against major currencies on weaker economic growth but was given a boost when Bank of England Governor Mark Carney set a more hawkish tone on interest rates at a parliamentary hearing yesterday.

The sterling/dollar exchange rate dropped towards 1.335 this morning on news that the UK inflation rate had fallen to a 13-month low – barely a month ago the pound was at 1.43 against the US currency.

Marks & Spencer (MKS) results came in as expected, leading to a small relief rally by investors in morning trading. However, a 62% drop in profits and higher costs from store closures cannot be ignored. This time last year the company’s shares were trading just below 400p, but now they are changing hands below 300p.

Retail sales data is due tomorrow so we will have more concrete information about the state of the UK high street.

Italy bond yields moved higher amid fears that new political leaders will hasten the country’s exit from the eurozone.

Emerging markets were rattled by the latest fall in the Turkish lira to a record low against the dollar. Turkey’s main stock exchange in Istanbul revealed today that it had converted all its cash assets in local currency to “show our confidence and to support the Turkish lira”.

North America

With global markets abruptly shifting to “risk-off” mode, with bond yields and safe haven currencies rising, a further fall in the Dow Jones is forecast for today.

The Dow slipped back below 25,000 points after a shortlived move above this key level. Not that long ago, the US index soared through 25,000 and then 26,000 points in record time.

US retailers releasing earnings today include luxury jeweller Tiffany (TIF) and Target (TGT) and clothes retailer Gap (GPS) on Thursday.

Canadian banks report earnings this week.