World events this week could in­flu­ence mar­kets

Brexit may be­gin, the Fed board meets and the Dutch go to the polls.

Austin American-Statesman - - BUSI­NESS - Mar­kets

In­vestors around the world are brac­ing for a se­ries of events this week that could po­ten­tially cause waves in mar­kets.

From the ex­pected launch of Bri­tain’s exit from the Euro­pean Union to the Fed­eral Re­serve’s dis­cus­sion of an­other in­ter­est rate hike, there’s a lot that could cause volatil­ity and even put a brake on the so-called Trump Bump, the month­s­long rally in stocks fol­low­ing the elec­tion of Pres­i­dent Don­ald Trump.

“This week is most un­usual from a macro point of view as there is a heavy con­cen­tra­tion of ‘event risk,’” said Neil MacKinnon, global macro strate­gist at VTB Cap­i­tal.

Here are a few of the big­gest events.

Brexit be­gins?

Brexit could be­come a bind­ing, ir­re­versible fact this week.

Since Bri­tain voted to leave the EU last June, noth­ing hap­pened apart from a sharp fall in the pound. But that pe­riod of calm is due to end, with the gov­ern­ment ex­pected to trig­ger, as soon as Tues­day, the for­mal process by which the coun­try leaves the bloc it’s been part of since 1973.

Trig­ger­ing the so-called Ar­ti­cle 50 of the EU treaty be­gins two years of di­vorce ne­go­ti­a­tions. They will fo­cus on how Bri­tain leaves the bloc and on cre­at­ing a new trade deal with the EU, its main ex­port mar­ket.

It’s un­clear how big the mar­ket re­ac­tion may be to the an­nounce­ment of the Ar­ti­cle 50. Traders will have come to ex­pect it to hap­pen even­tu­ally, which could mean the pound doesn’t drop too sharply on the day.

In the longer-term, how­ever, it means Bri­tish mar­kets will be sub­ject to a daily bar­rage of head­lines on how the ne­go­ti­a­tions are go­ing.

“It will prove chal­leng­ing for the gov­ern­ment to man­age ex­pec­ta­tions over a two-year pe­riod, and ne­go­ti­at­ing set­backs may be re­flected in height­ened fi­nan­cial mar­ket volatil­ity,” said James

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