Little market reaction to major events
GLOBAL sharemarkets reacted calmly yesterday after three major events were expected to cause market chaos.
The United Kingdom election caused the greatest shock after Labour leader Jeremy Corbyn led his party to a close loss to the Conservatives.
However, British Prime Minister Theresa May could struggle to form a government as she lacks support parties with the ‘‘hard’’ Brexit view she favours.
Craigs Investment Partners broker Peter McIntyre said markets viewed the UK election as too close to call.
In the AsiaPacific region, the only sharemarket to have a fall on the day was the NZX50, something he found surprising given New Zealand’s economy was in a strong position.
‘‘We have had a negative week, not that we have been sold off dramatically. We have lost 0.5%, plus today, on lightvolume days.
‘‘This is strange given we are the star as far as economic growth in the region is concerned.’’
There had been so many socalled shocks, equity markets tended to take them in their stride, he said.
There would be a reaction one way or another, then investors moved on. The New Zealand futures market was likely to open up.
The main damage was caused on the currency markets where yesterday, the British pound dropped on the election exit polls, Mr McIntyre said.
United States President Donald Trump survived one of the biggest threats to his presidency when the hugely awaited congressional testimony by the FBI chief he fired did not yield any explosive new disclosures about Mr Trump’s campaign’s alleged ties with Russia.
But former FBI director James Comey’s remarks to a packed hearing of the Senate intelligence committee left the Republican president far from unscathed.
Mr Comey recounted in vivid detail conversations with Mr Trump that he viewed as an effort to undermine an investigation of possible collusion between the Trump campaign and Russia.
He also said Mr Trump’s comments after firing him on May 9 that the FBI was in disarray and that its members had lost confidence in Mr Comey ‘‘were lies, plain and simple’’.
Mr McIntyre said Wall Street had seemingly judged the testimony of Mr Comey as not lifethreatening to Mr Trump’s Administration.
Mr Trump’s economic agenda was now likely to proceed, Mr McIntyre said.
The third event expected to move the markets was the European Central Bank meeting which left its financial stimulus programme in place.
Despite data earlier in the day showing the euro zone growing at its fastest clip since the ECB started printing money, ECB chief Mario Draghi played down expectations recently building that the bank could soon be scaling it back.
‘‘I want to emphasise that basically the ECB will be in the market for a long time,’’ Mr Draghi said at meeting held in Estonia.
Asked about the possibility of reducing its asset purchases in September, he added: ‘‘That was not discussed.’’
European banks led a sharp stocks retreat after Mr Draghi’s comment but another sharp Uturn hoisted them up more than 1% again, Mr McIntyre said.
The rise came after signs emerged of another euro zone bank rescue, this time in Italy, as well as a ‘‘pop’’ in energy stocks as oil recovered from a 5% tumble.
Mr Draghi’s comments also briefly knocked the euro below $US1.12 while bond yields slumped in Germany, hit a multimonth low in Spain and had the biggest drop since December in Italy.
‘‘The market’s initial assessment is the ECB is not quite as close to policy normalisation as previously thought,’’ Mr McIntyre said.