UK stocks hit 5-month highs

Summary:

• FTSE rallies to highest level since October
• Market back above 200 SMA
• GBP trading lower across the board

It’s been a bright start to the new week for stocks in London, with the FTSE rallying up near the 7300 mark to trade at its highest level since October. After a solid week of gains last time out, the pound has begun on the backfoot this morning, with the currency falling against all its peers. The largest declines for sterling pairs can be seen against the Antipodeans.

The UK100.cash has moved up to its highest level since October today, and in doing so price has recaptured the 200 day SMA. Source: xStation

Another busy Brexit week

The coming days could well prove pivotal on the Brexit front, with another meaningful vote on PM May’s deal expected tomorrow evening before the EU summit begins Thursday. There’s some speculation that the government will pull the vote at the last minute to avoid another humiliating defeat, with the position of the DUP seen as the likely decisive factor. If the DUP fail to get on board, then asking MPs to vote again appears to be a fruitless endeavour while there’s also some chatter that PM May could offer to step down to secure additional support. The uncertainty is weighing on the pound which is the worst performing major currency on the day. Longer-term both the fundamental and technical outlook for the pound appear fairly constructive, but for the here and now the market is extremely sensitive to headline risk related to Brexit.

German banks in mega merger talks

News that Commerzbank and Deutsche Bank have formally begun talks on a merger that would create the 2nd largest lender in the eurozone has boosted both stocks, with Deutsche Bank rallying over 4% and the best performer on the German Dax 30. This deal has long been mooted, largely due to the well documented problems at Deutsche and if agree upon would see the combined entity control €1.9T in assets and more than 140,000 employees. Shares in Deutsche Bank crashed to their lowest ever level of just €6.70 at the end of last year and came under more pressure in recent weeks after the ECB signalled they are unlikely to move the deposit rate out of negative territory anytime soon. Today’s gains have seen the stock move back above the  €8 mark but they still remain well below their pre-crisis peak of €112 and the large drop has opened up the possibility of a potential merger.