Brexit and Italy dominate European trade

Uncertainty remains the main feature of European markets with Brexit and the Italian budget high on the list of concerns. The FTSE, DAX and the CAC are all trading lower and US futures are showing signs of weakness. While the pound had a chance to recover a notch this is not necessarily good news for London stocks and although the news flow from Brussels about Brexit is turning slightly more positive UK blue-chip shares are still on the decline.

Setting the scene for the next chapter of Italy’s drama

Italy and the EU are set for a clash next week when the country submits its proposed budget to the European Commission with trenches being dug on both sides. Italian politicians on the right-wing and anti-establishment end of the governing coalition are repeatedly saying they have no intention to back down on plans for high spending next year, disregarding the tumbling stock markets and spiralling bond yields. Given that the country’s debt remains at an eye-wateringly high 130% of GDP the EC is likely to reject Italy’s budget proposal and open a procedure against the country’s public accounts. The Commission has to make an official decision before the end of November, until then volatility will remain a key feature of Italian markets.

Oil prices in between a real and metaphorical storm

Oil prices have stabilised for the moment – in between a real and a metaphorical storm. Hurricane Michael is powering ahead toward the Gulf of Mexico but it now seems likely to miss the main production areas there. On the other hand Iran sanctions are only weeks away but there are signs that the US may allow waivers for certain countries which will allow for oil to continue to flow into Western markets. Brent is trading at £84.7, off recent peaks but still at much higher levels compared with only a month ago. The three-figure oil price being called by some market participants may be slightly far-fetched but the storms need to blow over for any clarity on that.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.