After Monday's market slump and a wide return to safety, on Tuesday the markets are trying to stabilize. While the echo of the international banking and money laundering scandal may quickly fade away among the public, the introduction of restrictions due to the epidemic may be with us for longer and again have a negative impact on the economy.
Today, the indices on Europe's major stock exchanges seem to be rebounding after yesterday's sharp decline. We are talking especially about indices gathering technology companies because those in the face of the next lockdown started to gain quickly again. On the other hand, the shares of companies connected with travel or leisure seem to be falling further. According to the latest information, in the UK pubs, bars and other hospitality venues will have to close at 22:00 on Thursday and the government is recommending remote working if possible.
Since its peak in June, the UK's main stock exchange index FTSE 100 went back by 11 percent. Thus, the scale of the rebound from March's was lowered to 21 percent. For comparison, the German DAX index went back by 7 percent from its high, but the scale of growth from March is over 50 percent. Another lockdown in the UK with an unfinished brexit deal may be very unfavorable for the British economy, and thus for the pound, and for FTSE 100.
The Governor of the Bank of England, Andrew Bailey, said today that the recovery in the UK has been uneven and is ready to change policy if needed, after a careful look at the rate cuts. He added that the technical work on negative rates would take some time. This last statement in particular caused the interest rate market to postpone its expectations for rate cuts in the UK from March to May 2021. In turn, the negative rates are only being priced at the end of 2021. The GBP/USD rate seems to defend the 1.2700 area.
Global concerns about the lockdown, which may hit emerging markets, political issues in Poland, i.e. uncertainty about the ruling coalition along with the sell-off on the Warsaw Stock Exchange, may cause the zloty to sell out. Thus, the zloty weakened to its lowest level since May 25th in relation to the euro, exceeding 4.50. This was the fourth day of the zloty depreciation, which is the worst streak for the zloty since April.
Due to the surge of the coronavirus epidemic, investors in Poland are also waiting for the results of recent talks between the country's coalition members, as the worst-case scenario may involve even early elections, Bloomberg agency notes.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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