Global markets plunge as Trump uncertainty looms and May flags hard Brexit landing

By Trevor Hoey. Published at Jan 18, 2017, in Features

With every major global overseas market index having fallen overnight, the attention has been to turn to gold when the ASX opens on Wednesday morning.

Adding further lustre to the precious metal will be the fact that it gained circa US$20 per ounce as US markets unravelled.

Negative sentiment across global markets was also reflected in declines in iron ore and base metal prices. The oil price finished relatively flat after a moderate increase prior to US markets going into freefall in the afternoon session.

In the US, the Dow finished down 59 points after being off more than 100 points or 0.5% an hour before the close. The highflying NASDAQ retreated from recent record highs to finish circa 40 points lower or 0.75%.

However, the worst performing index was the FTSE 100 as it plunged more than 100 points, a fall of nearly 1.5%, which came on the back of comments by British Prime Minister Theresa May that clearly pointed to a hard Brexit landing and a commitment to make a decisive break with the European Union.

Early in May’s speech she said, “The British people voted for change and they did so with their eyes open, accepting that the road ahead will be uncertain at times, but believing that it leads towards a brighter future for their children – and their grandchildren too”.

However, the vote in favour of change was marginal and the ramifications of what it more specifically means for trade, overseas investment and jobs appears to have only been realised after the event.

May’s reference to ‘uncertain times’ wouldn’t have been what equity markets were looking for as there are few worse catalysts than uncertainty in terms of undermining investor confidence.

Some of yesterday’s best ASX 200 performances came from the gold sector with Regis Resources, Northern Star and Evolution Group all making good gains.

Other ASX 200 gold stocks that could join the march on Wednesday are Newcrest Mining, Resolute Mining, Saracen Mineral Holdings and St Barbara.

Looking at the broader market it is difficult to see any other positive leads taken from overseas, particularly given that money was being taken off the table in the US despite positive earnings season news.

Once again, it appears to come back to the issue of uncertainty with President-elect Donald Trump, not only being given the keys to the White House at the end of the week, but also being given the liberty of delivering an address which holds the prospect of being inflammatory on the back of fairly firm words from China and Germany in the last few days.

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