The FTSE 100 is expected to tread water today as Britain concludes its latest round of talks over a trade deal with the EU.
The Government has set a deadline of the end of this month to set out the main facets of the post-Brexit deal. However, there has been no obvious progress with the two sides at loggerheads and – with the next round of talks next week and another in August – hopes that a wide-ranging deal would be struck by the end of the year have taken a knock. The noise from Number 10 is reportedly that there has not been a breakthrough or a breakdown in talks, but there is an impasse.
In markets, the talks have been weighing on sterling, which fell against the euro yesterday and was flat this morning, around €1.10. The sentiment is expected to hold back the FTSE, opening flat at 6207. Asian markets were quiet overnight – with Tokyo shut for a public holiday in Japan – and indexes across the Continent are poised to edge up.
CMC Markets analyst Michael Hewson summed up the mood in markets of late, as the pandemic, the prospect of a vaccine and trade tensions dominate. He said: “It is becoming ever clearer that while concerns are rising over the global economic backdrop, as we head into the second half of the year, markets appear to be hedging their bets more and more when it comes to asset allocation.
“Equity investors, while remaining cautious about the outlook, still appear to be happy buying dips, as stock markets continue to trade in a manner that is two steps forward and one back, slowly ratcheting higher, with sharp drops in between.
“On the other hand, traditional safe havens are also doing well with gold and silver prices surging while bond yields also slipped back with the UK 10-year gilt posting a record low of 0.12%, while US 10-year treasury yields closed at a three-month low.”
In the UK, investors will be looking to get a read on world economies from consumer goods giant Unilever. The Marmite owner is a bellwether for economies across the globe selling in its products through retailers in most markets. Blue chips including outsourcer G4S, insurer Beazley and spread-better IG will also update on their performances.
When US markets open, traders will be focused on the number of coronavirus cases in America and developments in trade tensions with China. Nasdaq-listed Tesla could make further gains. Elon Musk’s electric carmaker last night saw its shares bounce over 4% in after-market trading, on reporting after posting a profit for the fourth consecutive quarter.
Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said: “We already knew Tesla’s manufacturing operations had navigated the first stages of the crisis well, with production and deliveries well ahead of analyst expectations.
“The questions were all about whether Tesla had also managed to protect its margins. In the event margins have been not only been protected but improved.” However, with shares already up 270% so far this year, the question is: when will the stock run out of road?