Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
After yesterday’s surge in sterling, the City is rather more subdued this morning as investors return to worrying about geopolitical issues.
And there’s plenty to concern us all today.
The tensions between India and Pakistan in Kashmir have escalated, with Pakistan claiming to have shot down two Indian jets this morning. This follows Delhi’s attack on what it claims was a terrorist training camp over the border.
With the two sides exchanging mortar fire across the border, the situation is rapidly becoming more serious.
The Karachi stock market has plunged 3.3% so far today, following the reports of jets being downed (Delhi hasn’t yet confirmed that it’s lost the planes). The Karachi 100 index of top Pakistani companies shed around 1,300 points to 37,531, as traders worried that the conflict could worsen.
Delhi’s stock market is also in the red, down 0.5% this morning.
Elsewhere, Donald Trump will be sitting down with his “friend”, North Korea’s Kim Jong-un, at their summit in Vietnam. The US president is hoping for a denuclearizion breakthrough….
…However, that meeting has been dramatically overshadowed by new testimony from the president’s former lawyer, Michael Cohen.
Cohen is due to tell Congress that Trump – who he dubs “a racist, a conman and a cheat” – was aware that WikiLeaks would publish emails stolen from the Democratic National Committee and Hillary Clinton’s campaign.
The remarkable allegations by Cohen go further than what has been made public thus far by the special counsel investigation into potential collusion between the Trump campaign in Moscow.
Cohen will also suggest his instructions to lie to Congress about a possible Trump Tower deal in Moscow during the 2016 campaign came from the president – albeit not directly.
So, this could easily overshadow the meeting:
City trader will also be watching parliament closely, as MPs prepare for next month’s votes on whether to pass Theresa May’s Brexit deal, extend Article 50, or leave without a deal.
Sterling is hovering close to yesterday’s 21-month high against the euro, at €1.165, as investors expect Brexit to be delayed.
But Lukman Otunuga, research analyst at FXTM, warns that there could be more volatility ahead:
While the Pound is likely to extend gains amid the current optimism, the question if for how long? It is quite frightening how sensitive and explosively volatile the Sterling has become to Brexit headlines, and this is likely to intensify as the March 29 deadline looms.
We’ll also get new economic data from the eurozone, US trade data, and another appearance by top US central banker Jerome Powell.
- 10am GMT: Eurozone consumer and economic confidence stats for February
- 1.30pm GMT: US advance trade balance for December
- 3pm GMT: Fed chair Jerome Powell testifies to Congress