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Goldman Asset Management Sees a Brexit Deal But the Good News Ends There By Bloomberg

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© Reuters. Goldman Asset Sees a Brexit Deal But the Good News Ends There

(Bloomberg) — Goldman Sachs Asset Management needs more than just the promise of a late-stage Brexit deal to turn bullish on U.K. assets.

The fund is betting that Britain and the European Union will strike a “thin” trade pact toward year-end, yet maintains a “broadly neutral” position in the pound, gilts and nation’s corporate credit market regardless.

The economy faces “Covid-19 and Brexit headwinds, with markets oscillating between developments on both,” Hugh Briscoe, global fixed-income portfolio manager at the firm, said in an interview Sept. 25.

GSAM has held these views through the year, and Briscoe’s comments were left unchanged after Bloomberg contacted an external public relations representative on Thursday.

On Friday, the pound swung to a gain after the U.K. announced Prime Minister Boris Johnson will hold talks on Saturday with European Commission President Ursula von der Leyen. It’s been a volatile week for the currency amid conflicting signals about the outcome of a final scheduled round of Brexit negotiations that could determine whether Britain avoids a messy divorce at year-end.

“Despite fragile and often volatile negotiations, I do think the EU and U.K. will reach a deal,” Briscoe said.

Yet four years of uncertainty over the U.K.’s future outside the bloc have already taken their toll on the economy. And the latest spike in coronavirus cases are further muffling the significance of every twist and turn in the drama for some investors.

Financial services firms operating in the U.K. have shifted about 7,500 employees and more than 1.2 trillion pounds ($1.6 trillion) of assets to the European Union ahead of Brexit — with more likely to follow in coming weeks, according to EY, one of the world’s largest accounting firms.

Despite the bleak outlook for the economy, GSAM doesn’t expect the Bank of England will cut interest rates below zero. Economists at Goldman Sachs Group Inc (NYSE:). said in September that failure to reach a trade deal could be among the factors that would push rates into negative territory.

“The central bank’s commentary has been somewhat nuanced, perhaps because policy makers would like to preserve optionality in event of an untidy Brexit,” Briscoe said. “In any case, we have scaled back our underweight position in U.K. rates.”

 

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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British Pound (GBP) Latest – PMIs Warn of Q4 Slowdown, Brexit Talks Continue

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Brexit, Vaccine Talks and GBP/USD Price, Analysis and Chart:

  • UK PMIs in expansion territory but the service sector slows down.
  • Brexit optimism as both sides return to the negotiating table.
  • GBP/USD presses against 1.3100

The latest UK PMIs showed a sharp slowdown in business activity in October, compared to the previous month, due to a ‘much weaker contribution from the service economy’. While all three readings show the economy expanding, ‘the slowdown would have been even more pronounced had it not been for exports rising as overseas customers sought to secure orders before potential supply disruptions as Brexit draws closer’, according to Chris Williamson, the chief business economist at IHS Markit. Williamson expects the UK economy to expand in Q4, but the rate of growth ‘looks to have slowed sharply and the risk of a renewed downturn has risen’.

British Pound (GBP) Latest - PMIs Warn of Q4 Slowdown, Brexit Talks Continue

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There is a growing sense of optimism that the EU and UK can come to a post-Brexit trade deal in the next couple of weeks as both sides re-commit to fresh talks, starting today. These talks will continue over the weekend and into next week and beyond with both sides now implying that there could be compromises made to seal a deal. An article in the Daily Telegraph also said that senior figures in the EU’s negotiating team have been told not to leak details of the talks, as it is ‘vital the negotiations are given a last chance for success’.

In other Sterling-friendly news, the Oxford University vaccine trials are showing positive results and according to a University of Bristol report the vaccine ‘successfully produces a strong immune response’. The UK government has already purchased 60 million doses of the Oxford University/AstraZeneca drug which may be available for the vulnerable by the end of the year.

GBP/USD broke back above 1.3100 in early turnover but is now fading lower. The pair continue to be buttressed by Brexit hopes while ongoing US stimulus talks are adding volatility to the US dollar. As yet there is no new stimulus deal although reports suggest that there is a possibility that a deal may be struck, although not before the November 3 presidential election. With ongoing Brexit trade talks and US stimulus discussions, GBP/USD has a pair of heavyweight fundamental drivers in play, and as such caution is warranted.

GBP/USD Daily Price Chart (April – October 23, 2020)

British Pound (GBP) Latest - PMIs Warn of Q4 Slowdown, Brexit Talks Continue



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily 35% -21% -4%
Weekly -16% 35% 8%

IG client sentiment data show 36.44% of traders are net-long with the ratio of traders short to long at 1.74 to 1. The number of traders net-long is 17.32% higher than yesterday and 27.12% lower from last week, while the number of traders net-short is 16.02% lower than yesterday and 51.58% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise.Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD trading bias.

Traders of all levels and abilities will find something to help them make more informed decisions in the new and improved DailyFX Trading Education Centre

What is your view on Sterling – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.





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Hong Kong Connect Opens China’s ETF Market to Global Investors By Bloomberg

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© Reuters. Hong Kong Connect Opens China’s ETF Market to Global Investors

(Bloomberg) — China’s fast-growing $157 billion market for exchange-traded funds will be directly accessible to overseas investors from Friday, at least four years since the plan was first hatched.

Four so-called “feeder” ETFs will begin trading in Shenzhen and Hong Kong, the first batch in a project aimed at connecting the two markets. The Shenzhen funds will track the China Enterprises Index and the S&P New China Sectors Index, while the Hong Kong-listed ETFs will follow the benchmark CSI 300 Index and a gauge of China’s 5G companies.

The investment vehicles, popular with retail traders around the world because they’re among the cheapest way to trade an index, will collect capital locally and settle trades across the border. Some 900 million yuan ($135 million) of funds has been gathered in a pre-sale of the ICBC CSOP S&P New China Sectors ETF, said Melody He, managing director at provider CSOP Asset Management Ltd.

Regulators in Hong Kong have been mulling broadening trading links with mainland China to include ETFs since at least 2016. The plan was delayed partly due to complex clearing and settlement issues. At $40 billion, Hong Kong’s ETF market is smaller than the mainland’s even though its first fund was launched five years before China’s in 1999. ETFs in China nearly doubled in value in the first half of this year.

“This is the very start of ETF connectivity,” said Bloomberg Intelligence analyst Sharnie Wong.

While there are ETFs in Hong Kong, London or New York following China’s onshore equity market, the tracking error can be as high as 15%, partly due to limits on foreign ownership. The feeder ETFs can better replicate mainland benchmarks because their providers are local and won’t be subject to caps. Overseas investors are currently permitted to own no more than 30% in yuan-denominated shares.

Unlike other major stock markets in the U.S. or Japan, China — the world’s second largest — isn’t overrun by ETFs. Individual investors haven’t caught on to the products even though costs can be a lot lower than with mutual funds, partly due to little demand for individual stock research.

China ETFs Give Retail Investors Access to Soaring Tech, Ant

ETFs can be traded in real time and in the U.S. are growing increasingly complex and diverse since the first one came about in 1993. China’s first ETF was launched by China Asset Management Co. in 2004. They only started to gain traction in China after MSCI Inc. added yuan-denominated shares to its benchmarks in 2018.

Cross-border trading of ETFs between Hong Kong and mainland China will take time to grow, said Wong, adding that the experience of the stock connect scheme launched in 2014 between both sides could be instructive.

“It could take six years for northbound trading to contribute 5% to mainland China’s ETF turnover, assuming participation of international investors in ETFs is similar to that of A-shares,” she said.

“It may take only two years for southbound trading to contribute 5% to Hong Kong’s ETF turnover, if mainland investors appetite for Hong Kong listed ETFs is similar to that of stocks.”

©2020 Bloomberg L.P.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Europe’s Economy Risks New Contraction From Virus Curbs By Bloomberg

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© Reuters Europe’s Economy Risks New Contraction From Virus Curbs

(Bloomberg) — The resurgence of the coronavirus has knocked Europe’s economic recovery back a step and raised the possibility of another contraction.

IHS Markit’s monthly measure of business activity fell to a four-month low of 49.4 in October from 50.4 in September. Within the report is a clear, divergent trend of manufacturing strength being offset by damage to services from the second wave of the pandemic.

New government curbs as well as consumer fears of the virus are driving the two-speed economy. In Paris and eight other major French cities, authorities introduced a curfew this month that’s hitting restaurants and bars particularly hard. In Germany, a Bavarian district imposed a two-week lockdown after infections climbed above a rate that triggers an automatic tightening of restrictions.

While the weakness is largely limited to services, the fallout on jobs and spillovers to the rest of the economy will worry policy makers. The deteriorating outlook strengthens the case for the European Central Bank to pump more monetary stimulus into the economy, and governments may have to extend expensive aid programs.

IHS Markit warned that the euro-area economy could shrink again this quarter. Its report said employment fell again in October, confidence deteriorated and orders declined.

“While the overall downturn remains only modest, and far slighter than seen during the second quarter, the prospect of a slide back into recession will exert greater pressure on the ECB to add more stimulus and for national governments to help cushion the impact of Covid-19 containment measures,” said Chris Williamson, chief business economist at IHS Markit.

 

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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