The combination of an announced trade deal between China and the US, and a commitment from the US Federal Reserve to inject liquidity over year-end, lifted stock and commodities on Friday night. The UK election continues to reverberate, lifting the UK 100 index to outperform and keeping the Pound near recent highs. China data due mid-session could shape regional trading ahead of activity releases in Europe and the US tonight.
Although the trade deal is low on tangible commitments, removal of the threat of increasing tariffs lifted investor confidence. On Sunday top US Trade Representative Robert Lighthizer told a television audience that the phase-one deal is “totally done”, and negotiators now immediately begin talks on the next steps. The agreement follows the signing of a trade agreement between the US, Mexico and Canada last week. The improved outlook for global trade could lift growth-exposed assets in the coming days.
The US Federal Reserve also laid out plans to inject more than $400 billion in its daily liquidity operations between now and early January. The accommodation is another driver of market optimism.
Both the Pound and the UK 100 hit six-month highs on Friday night. The increased certainty around a Brexit timetable and the avoidance of a punitive business environment may see ongoing support for British assets.
China releases industrial production (forecast +5.0%) and retail sales (f/c +7.6%) data early this afternoon. The Australian treasurer will unveil a mid-year budget update. Analysts will zoom in on growth forecasts, while journalist will look to the headline surplus or deficit. Attention then turns to PMIs due from the UK, Germany France and the US tonight.