March 28, 2023
Stocks Subdued by US Stimulus Doubts and Brexit

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On Friday, world shares slipped as uncertainty regarding US stimulus talks and tricky Brexit negotiations reduced riskier bets even though coronavirus vaccines made progress, keeping the dollar weak and pushing Sterling down. There was a fall in European equities, with a 1.1% decline in the Euro STOXX 600 and indexes in London and Paris falling by 1% and 1.2%, respectively. The MSCI’s world equity index, which keeps track of shares in over 49 countries, ended up being in the red. On Thursday, US stocks were mixed, as any US fiscal stimulus in the near-term seemed rather unlikely. Nancy Pelosi, the Democrat House Speaker suggested that negotiations over COVID-19 aid and a spending package could drag on till Christmas.

Investors were also vexed with Brexit as Boris Johnson, the British Prime Minister said on Thursday that there was a ‘strong possibility’ that the European Union and Britain would fail to reach a trade agreement. The two parties have set a deadline for Sunday for making an agreement, before Britain leaves the bloc on January 1st. On Friday, there was a 61% increase in a disorderly Brexit odds, which had been 53% on Thursday. There was a 0.5% fall in Sterling and it was set to end gains of five weeks straight as currency traders made adjustments for an expected hit to the British economy if no trade deal is made.

Market analysts said that investors were right to be concerned because there will be implications of a no-deal Brexit and some sort of correction should be expected. There was a 0.2% fall in US futures gauges. Still, investors are betting on a strong economic growth in the next year, as more countries are gearing up for vaccinations. This helped the Asia-Pacific index of the MSCI outside of Japan to increase by 0.2%, as it heads towards its six straight weeks of gains. 

There was an overwhelming vote of US authorities in endorsing the emergency use of Pfizer’s COVID-19 vaccine, while doses of a coronavirus vaccine by China’s Sinovac Biotech are also rolling off a Brazilian production line. The demand for recent initial public offerings in the US also indicated that investors were more upbeat in regard to equities, even as the job data indicated weakness in the biggest economy in the world. On Thursday, the shares of Airbnb Inc. made their stock market debut and nearly doubled, as the home rental firm was valued at more than $100 billion in the biggest initial public offering in the US this year.

Stocks of Door Dash Inc. also doubled in their first day of trading. Meanwhile, there was an unexpected increase in the number of Americans filing for unemployment benefits last week, as increasing COVID-19 infections resulted in more business restrictions. As far as the currency markets are concerned, sterling was trading at $1.3228, which is a loss of 1.5% against the dollar this week. It was on course for its first weekly decline since October. Emerging markets currencies, on the other hand, were heading for their sixth week of gains.

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