The US stock market is expected to rally when it opens in an hour’s time (unless London’s tech gremlins scamper across the Atlantic and wreck more havoc).
The Dow Jones industrial average is up 230 points in the futures market – which would recover a chunk of Wednesday’s 800-point tumble.
Traders are citing hopes of a US-China trade war breakthrough, after Donald Trump said he hopes to speak with Xi Jinping soon.
But let’s not get carried away; as things stand, America will impose fresh tariffs on Chinese consumer goods next month, meaning Beijing will retaliate.
Money is still pouring into the world’s government bond markets today, as asset managers look for a place of safety.
Prices are hitting new highs, dragging yields (the rate of return on the debt) to fresh lows.
Germany’s 10-year bund yield, for example, just hit minus 0.72% for the first time ever — meaning investors are prepared to lose money to lend to Berlin for a decade.
They’ll be calculating that the European Central Bank’s forthcoming stimulus package will drive bond yields even lower, as the ECB will create new money to buy bonds with.
Sweden is also benefitting — its 20-year bond yield has just tumbled below 0%. That means the entire Swedish bond yield curve is negative (longer-dated debt is yielding less than short-dated bonds).
That shows investors are pessimistic about growth prospects, having noticed that Sweden’s economy contracted in the last quarter.
Now that London’s stock market is back in business, City investors can return to fretting about the risks of a global downturn.
This week’s market turbulence, and the now notorious inversion of the US government bond yield curve, have put traders on edge.
Hong Kong’s has now added to the jitters, reporting that its economy shrank by 0.4% in the second quarter of this year. That’s worse than the 0.3% decline first reported.
Hong Kong thus joins Germany, the UK and Sweden, which also suffered a contraction in April-June, as the world economy slows.
This may also indicate that the pro-democracy protests that gripped the city for months are having a more serious impact on its economy than first thought. With tourism down, and the Hong Kong airport seriously disrupted this week, the region could soon be in recession.
Here’s our news story on the gremlins taking control of the London stock market.
The LSE won’t say exactly what went wrong this morning, apart that the problem centred on its software.
Here’s the official statement:
London Stock Exchange experienced a technical software issue this morning that affected trading in certain securities, including FTSE 100 and FTSE 250 stocks.
Following resolution of the issue regular trading in all securities commenced at 09.40.
That issue scuppered the usual pre-open auction (which helps to set prices before trading gets underway at 8am).
AJ Bell investment director Russ Mould says today’s problems have livened up an otherwise dull morning:
Investors would have been yearning for a quiet Friday after a week of turmoil for the markets driven by recession fears.
“And it looked like just such a peaceful interlude was on the cards until technical issues at the London Stock Exchange delayed the start of trading in FTSE 350 stocks, delaying an expected rebound for the index.”
Today’s stock market glitch hasn’t affected the pound, which has just jumped to its highest level in eight days.
Sterling has gained 0.5% against the US dollar to $1.2141, as the campaign to prevent a no-deal Brexit in October gathers pace.
Earlier today the leader of the Liberal Democrats, Jo Swinson, insisted that an emergency government could be installed to prevent Britain crashing out of the EU, and that Conservative grandee Ken Clarke and senior Labour MP Harriet Harman – the father and mother of the house – are both willing to lead it.
The London Stock Exchange has just revealed that some buy and sell orders that should have expired this morning are still lurking on its trading platform.
That may explain why trading was delayed for so long.
The LSE says:
GTD orders expected to expire this morning have remained in the system.
These orders cannot be traded against and are still being advertised via Market Data. This has caused crossed order books. This is being investigated and an update will be provided at 10:30.
What, I hear some readers cry, is a GTD order?
It stands for ‘good until date’ — an instruction to one’s broker to maintain a buy or sell order until a specific time. Then it would expire, unless it had already been executed.
Failing to cancel a GTD order as instructed would cause problem — asset managers might find they’ve bought or sold something they didn’t mean to…..
The London stock market seems to be trading normally now, after being stricken for more than an hour and a half.
Every sector is higher, with telecoms, financial stocks and healthcare leading the way.
But even so, investors didn’t need the drama, following the wild swings in asset prices we saw this week.
The BBC’s Victoria Fritz points out that nerves were already frazzled by recession fears.