European shares recover on Black Friday

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London shares and the pound performed a U-turn this morning as Brexit tensions are not abating, with stocks trading higher and the pound firmly on a downward trajectory. Stocks are being further helped by the anticipation of the Black Friday spend fest across Europe and the US when operations restart there later today following the Thanksgiving holiday.

European gauges are all in positive territory led by Italy where banks rallied and bond yields dropped on reports – later denied – that the country’s EU Affairs Minister Paolo Savona is considering resigning. Milan’s FTSE MIB index is up 0.7% this morning with the FTSE trading 0.29% higher.

Brexit volatility remains in place

The pound is now almost flat against the euro but is sliding against the dollar after a rally against both currencies late Thursday when the European Council approved a political declaration which sets out the framework for the long-term relationship between the UK and the EU after Brexit. This is a different document from the draft Brexit 500-page withdrawal agreement brought home by Prime Minister Theresa May last week. The pound lost ground after its initial spark up as it became clear that the political declaration is not a legally binding document, unlike the draft Brexit deal presented to Parliament. The latter still has to be approved at the European summit this weekend and Spain has already vowed to vote against the agreement because of Gibraltar. Spain’s vote is not enough to hold back the deal but it would be tricky for Britain if it wants to gather support from other countries because the approval has to be by a qualified majority.

Oil decline continues

Oil prices continued to decline this morning and although most analysts claim that this has to do with supply overhang and increased production from Russia and Saudi Arabia the bottom line is that the US President keeps pushing for lower prices and while this is the case it will be difficult to see a return to oil at a higher level unless oil cartel OPEC decides on a major output cut at its next meeting on December 6.