News & Analysis

Week Ahead – Geopolitics and Trade Tensions

May 27, 2019

By Deepta Bolaky

Market Overview

Geopolitics and trade tensions rattled the markets throughout last week. We saw a rebound on Friday in the stock markets on some positive trade comments that allowed risk sentiment to take control.

Week Ahead

The start of the week will be relatively quiet with a public holiday in the UK and the US. The focus will be on the European Parliament Election and President Trump visit in Japan on Monday. There is some trade optimism between US and Japan making headlines. Risk sentiment this week will predominantly remain driven by global politics and trade negotiations.

European Parliamentary Election 

Pro-European parties are leading, and the parties threatening the future of the bloc are not performing well. Compared to the previous election, the European People Party (EPP) and Social Democrats (S&D) are securing lesser seats while the new centrist-liberal coalition, Group of Alliance of Liberals and Democrats for Europe and Renaissance (ALDE&R) added seats.  

Latest Updates: European Parliament projections


Despite the rise of Euro-sceptic parties, pro-EU parties will control a substantial majority, but the balance of power among them will be hard to determine, and the Parliament might be much more fragmented this time which will impact decision-making for EU.


Brexit Blues

After failing three times to deliver Brexit, Theresa May resigned as Prime Minister of the UK and as leader of the Conservative and Unionist Party. However, the reactions in the markets were short-lived. In light of Brexit chaos, the newly formed Brexit Party is beating the two main parties as per early results and projections. This can translate into a “big message” for the markets.

Source: BBC

We expect the focus to be geared towards who will be the next “Prime Minister” while market participants evaluate the chances of a harder Brexit. The resignation of Theresa May is unlikely going to bring more unity, trust or faith but the next PM will have to face the same divisions and would have to build the agreement in Parliament.

The prospects of a no-deal Brexit are deeply concerning and will probably keep a lid on the local currency.

Trade Tensions

Equity markets were shaky due to the escalating trade tensions between the US and China. The attention has switched to China’s major technology companies, which is a reminder that trade uncertainties will remain the lingering risk factor for the financial markets in the foreseeable future.

Cryptocurrencies Markets

Cryptocurrencies appeared to have revived amid geopolitical and trade tensions. It is hard to ignore how the crypto market suddenly surges amid market angst. Bitcoin, the bellwether of cryptocurrencies surged from around $3,000 to $8,000.

After a chaotic 2018 that saw its downfall, is a slowing global economy and geopolitical & trade tensions forcing investors to seek safety in cryptocurrencies?

Tuesday, 28 May 2019
Indicative Index Dividends
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ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0 0 0.026 0.016 0 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 0 0 0

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