Brexit Vote Delayed, Rates and Equities Higher Amid Earnings Optimism

 

Rates and risk assets rise as optimism around corporate earnings helps outweigh trade headwinds. The S&P 500 has risen 0.40% on the day as earnings season in the US continues in full swing. Companies reporting this week include Amazon, Microsoft, Kia, McDonald’s, Proctor & Gamble and Caterpillar. Treasury yields and swap rates are also higher amid the optimism, up 1-2 basis points after a mixed Friday. The FOMC has now entered its quiet period ahead of its 10/31/2019 meeting, Fed Funds futures currently pricing in a 89.4% likelihood of an additional rate cut.

 

 

Brexit drama continues as parliamentary vote is delayed. A vote on a recently negotiated Brexit deal was planned for this past Saturday, but got delayed after members of Parliament walked out, forcing UK Prime Minister to request an extension to the existing October 31st deadline. An extension to the Brexit deadline is now the most expected outcome, PredictIt showing the odds of a Brexit by 10/31 at 27%. Risk assets in Europe have rallied as the odds of a no-deal Brexit have diminished, the FTSE 100 rising 0.25% on the day.

 

 

Week ahead. In addition to a busy earnings calendar, markets will get the latest existing homes sales data tomorrow. Durable goods orders, jobless claims and new home sales will follow on Thursday. The University of Michigan’ consumer sentiment survey for the month of October will round out the week on Friday.