Bull Market

Risk Appetite in Asia Surges as UK Prime Minister May Secures Brexit Assurances

The major Asia-Pacific indexes are trading higher on Tuesday, following the lead of the strong finish in U.S. markets. Strong gains in U.S. technology shares are also carrying over to Asian tech companies.

Rising investor sentiment is signaling increasing demand for risky assets. This is being fueled by the news that British Prime Minister Theresa May managed to secure last minute support from the European Union for her Brexit deal before it goes to a crucial vote on Tuesday.

At 02:42 GMT, Japan’s Nikkei 225 Index is trading 21493.88, up 368.79 or +1.75 percent. Hong Kong’s Hang Seng Index is trading 28857.25, up 353.95 or +1.24 percent and South Korea’s KOSPI Index is at 2153.90, up 15.80 or +0.74 percent.

In China, the benchmark Shanghai Index is trading 3063.77, up 36.78 or +1.21. In Australia, the S&P/ASX 200 finished at 6200.80, up 20.60 or +0.33 percent.

Improving Risk Appetite

Shares in the U.S. and Asia are rebounding after last week’s dismal performance. Stocks trended lower last week on rising concerns of a global economic slowdown. The weakness was fueled by disappointing trade balance news from China and a plunge in the number of new hires in the U.S. in February.

The Asian-Pacific markets got an early boost from strong gains in U.S. technology shares on Monday, led by a stellar performance in shares of Apple. Stocks extended their gains early Tuesday as investors increased bets UK Prime Minister May could secure a divorce deal before Britain’s scheduled March 29 departure from the EU.

May Secures Brexit Assurances

Risk appetite jumped early Tuesday as speculative buyers reacted positively to the news that U.K. Prime Minister Theresa May might be closer to securing approval for her Brexit deal.

According to reports, May won legally binding Brexit assurances from the European Union, in a last ditch attempt to sway rebellious British lawmakers who have threatened to vote down her divorce deal in a parliamentary vote on Tuesday.

CNBC reported that at a news conference with European Commission head Jean-Claude Juncker late on Monday, May announced three documents aimed at addressing the most contentious part of the exit deal she agreed in November – the Irish backstop.

“The Irish backstop is an insurance policy aimed at avoiding controls on the sensitive border between the British province of Northern Ireland and EU member Ireland.

Bullish traders are betting there can be some negotiation or at least a compromise on both sides. They are more than offsetting the bearish traders who are betting the deal will get rejected.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.