Originally published by IG Markets
Last night the UK voted in a snap election called by Prime Minister Theresa May in an attempt to gain a greater parliamentary majority and strengthen her negotiating position regarding Brexit. Unfortunately for May, the exit polls are suggesting that the number of seats held by the conservatives may actually reduce and possibly leave them with a hung parliament. This would leave open the possibility of Labour forming a coalition with the Scottish Nationalist Party and therefore making a coalition government. Regardless of the outcome, Brexit will still occur, the uncertainty comes down to the strength of the UK’s negotiating position and which concessions they will be willing to make. The pound has fallen sharply on the news to a one month low of 1.2796 against the US dollar.
Former FBI director James Comey testified to a senate intelligence committee regarding whether his firing was related to his investigation into potential links between the Trump campaign and Russia. The testimony didn’t directly incriminate Trump and interestingly the market seemed unconcerned about these proceedings. The Dow Jones Industrial Average rallied early on in the session reaching new all-time highs although it was unable to hold on to the gains and retreated back to close up just 0.04%. It was a similar story for the S&P 500.
Crude oil stabilised overnight after two weeks of declines. Saudi Arabia has reduced exports to the US in an attempt to bring US stockpiles down. Although US stockpiles aren’t necessarily more important than any others, they are the most visible as a result of open customs data. As a result, changes in US inventories are seen as a proxy for global over/undersupply. Saudi Arabia’s plan of bringing US inventories down is an attempt to boost the oil price which is now very close to a multi-month low at $45.70 per barrel.
Gold prices have continued to slide after a month of steady increases. A large value of gold futures contracts were sold onto the market early in the US session sending the price over $10 lower in a short space of time. Following this spike down, the price recovered steadily throughout the trading day.
The S&P/ASX 200 is set to open slightly higher this morning based on futures prices.
Data releases:
· Chinese CPI & PPI (YoY May) 11:30am AEDT