As the trading week gets underway, once again it is the political world that has the attention of markets and creates economic impact. The latest political news (UK) that Brexit Secretary David Davis resigns from his post broke late on Sunday evening may have been expected to unsettle some – but that hasn't been the case so far.
At first glance, this rise might seem somewhat illogical. But traders seem to be taking the weekend discussions and Davis' resignation as a sign that a soft Brexit could be on the cards – although the news later on Monday that Foreign Secretary Boris Johnson resigns from his role as Foreign Secretary does not exactly add much stability to Prime Minister May's government and has taken away some of the pound's early momentum.
Politics is likely to be making the headlines for the rest of the week as US President Trump visits the UK. But it's also another important week for the US markets as it is the start of earnings season. The season kicks off on Tuesday with PepsiCo but the main focus is likely to be Friday when JP Morgan’s results, along with other major US banks such as Citigroup, results are revealed and we discover how the last quarter was for their businesses. Expectations are running high that the last three months have been good ones – any misses here could well dent the near 10% recovery US stocks have enjoyed over the past three months.
In other markets, crude oil price historyremains just below its recent three and a half-year high. The last 12 months have seen the crude price rise by 70%, with little impact so far on the bigger economic picture. It does feel as if something needs to give here – $100 a barrel oil would surely start to slow down the world economy – but for now, at least, any dips in the price of crude just serve to fuel more buying.