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New PM May keeps uncertainty at bay

Published Tuesday, July 12th, 2016

The post-Brexit uncertainty that has stifled UK politics eased significantly yesterday after it emerged that Theresa May was set to be installed as the country’s second woman Prime Minister. This welcomed development came as the only other candidate pulled out of the Conservative Party leadership race and ends a period of limbo in which the outgoing PM David Cameron resigned following the UK’s decision to break away from the European Union. Known as a pragmatist and previously part of the Remain campaign, the UK’s PM-in-waiting has said that there will be no second EU referendum and that “Brexit means Brexit”. Though this provides some much needed clarity that the divorce process will indeed take place, she hinted that the formal application to withdraw from the bloc won’t be made this year which will put her at loggerheads with EU leaders who want Britain to leave as soon as possible.

Investors gave the thumbs up to the looming change of guard in Westminster as European share indices advanced 1.5% and were led by London’s more domestic focused FTSE 250 which jumped 3% to a post-referendum high. The pound was another notable winner as it climbed its way back above $1.30 though this strength may be dampened by the BoE which is expected to trim interest rates when it meets on Thursday. Hopes of central bank support also underpinned sturdy gains in Asia where Japan’s Nikkei 225 surged 4% and added another 2.5% overnight as PM Abe announced a fresh round of stimulus shortly after triumphing at weekend elections. Meanwhile, the relief rally saw shares on Wall Street register a modest advance which was enough push the S&P 500 to a record closing high and the Nasdaq above 5000 for the first time this year as traders continued to bask in Friday’s solid US jobs report.

The feel good factor across global stock markets however failed to find its way into the oil markets where lingering concerns of oversupply undermined sentiment. A brief suspension in crude oil loadings at Basra’s oil terminal following a pipe leak did little to offer support to the crude complex as did reports that North Sea oil output is predicted to fall in August by 90,000 bpd to 1.86 mbpd from July. News that flows of Bonny Light crude along Nigeria’s Trans Niger Pipeline were halted had a similarly muted impact on prices. Brent ended the session 51cts/bbl down at $46.25/bbl and WTI slipped 65cts/bbl to $44.76/bbl though both are recovering part of these losses

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.