Equity markets in Europe have been lifted on the back of the hopes surrounding the US-China trade talks as well as the Brexit discussions.

Europe

Later today, President Trump will meet with China’s Vice Premier, Liu He, and dealers are optimistic as Trump tweeted that ‘good things are happening’ at the trade talks. Dealers have been taking their cues from the US president, so hopes are running high.   

In a nice change of pace, we heard positive mood music yesterday from the meeting between Prime Minister Johnson, and Ireland’s Leo Varadkar. The politicians said there is a ‘pathway’ for an agreement being struck, but both sides have been guarded when it comes to the finer details. Nonetheless, dealers are hopeful of progress being made, which explains the drive higher in UK banks in addition to home builders.

The optimism surrounding Brexit has given British banks a boost as UK government bond yields have ticked up. Bank’s lending margins usually improve in an environment of higher bond yields, hence why RBS, Lloyds, Barclays and HSBS are higher today. The fear of a disorderly Brexit has been hanging over the property sector. In light of the upbeat sentiment, traders are snapping up Bovis Homes, Persimmon, Taylor Wimpey, in addition to Berkeley Homes. 

SAP shares rallied today as the group posted solid quarterly figures last night. Operating profit for the three month period jumped by 36%. Cloud computing is a high growth sector, and SAP are performing well as cloud revenue jumped by 37%. The firm reiterated its full-year outlook too, which added to the bullish sentiment. 

Publicis Groupe shares are in the red today after the group warned that full-year group revenue would shrink by 2.5%. It was the second warning on revenue in three months, so traders were extra spooked by the update. The advertising group have had to adapt to the changes in the sector, as firms have been using the like likes of Google plus Facebook for advertising. Publiicis Groupe have found the turnaround to be tougher to than initially thought. WPP are in the red too.       

US

Wall Street is enjoying a bullish run as dealers are snapping up stocks as the US-China trade talks have entered their second day. The negotiations are going well so far, which has driven equity markets higher. The positive sentiment is likely to continue as long as there isn’t a hiccup in the trade talks. The University of Michigan consumer sentiment jumped to 96 in October from 93.2 in October, so consumers are clearly keen to spend.                          

The trade spat, combined with an economic slowdown in China has hurt Ford, as the group said that third-quarter vehicle deliveries to that country dropped by 30%. Keep in mind, the US car manufacturer saw first-quarter and second-quarter sales fall by 36% and 22% respectively. The wider economic slowdown in China can’t be turned around, but an improvement in US-China trade relations could be very helpful to the group.

Apple shares hit an intraday all-time high on US-China trade hopes. China of major importance to the tech giant in terms of sales, sourcing components as well as manufacturing so traders are buying the stock of hopes of an improved trading relationship.

FX

GBP/USD has soared again on reports that Brexit negotiations are heading in the right direction. Traders are driving up sterling in anticipation that some sort of breakthrough will be achieved in the near-term. Some traders are cautious the new arrangement could be similar to Theresa May’s deal –which was voted down in Westminster three times.

EUR/USD has been boosted by the optimism surrounding the Brexit situation. To an extent, the weakness in the greenback in has helped to euro too. Should the UK exit the EU in an orderly fashion, it should help the single currency.    

Commodities

Gold has been hit by the risk-on attitude of traders. The surge in global stocks has encouraged traders to exit their gold positions, as there isn’t much fear in the markets – gold usually outperforms when dealers are panicked.

Oil has been pushed higher after it was reported two missiles struck on Iranian oil tanker. The oil market was already pushing higher on account of the US-China trade hopes, so the news of the missile attack accelerated the buying.          

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