Positive vibes around US, China trade talks as well as Brexit talks has seen the pound and global stock markets rise strongly over the last 24 hours, as optimism grows that we might see a breakthrough in one, or even both.
The reaction in the value of the pound was particularly notable after talks between Irish Prime Minister Leo Varadkar and UK Prime Minister Boris Johnson ended with both stating that they saw a pathway to a deal.
The pound rallied strongly, posting its best performance in seven months, however given we’ve been here so many times before this optimism needs to be tempered by the fact that any deal would have to be approved not only by the EU, but by MPs here as well, and MPs track record on agreeing on anything in recent months hasn’t been particularly great.
With this in mind this optimism could well be short-lived with any progress likely to be as elusive as the pot of gold at the end of the rainbow. Given where we were at the beginning of the week and at the risk of being cynical, a deal still seems quite a long way off given the distance between both sides relative positions, and recent comments from Michel Barnier that neither side is in a position where we are able to find an agreement.
In short this pathway to a deal could well be a road to nowhere, we shall see!
On US, China trade we’ve also seen rising optimism after President Trump said that talks were going well and that he would be meeting Chinese vice Premier Liu He later today. There is no doubt that a pause in further tariffs would be welcome, while a partial agreement on aspects that were agreed before the breakdown in talks would also be positive.
The question is on whether either side can sell this at home, with Chinese leaders also under pressure to not be seen to bend too much.
As we head into the weekend European markets look set to build on the gains seen in US and Asia markets, with the DAX opening at its best levels in over a week, while the FTSE100 is lagging behind, largely as a result of the surge higher in the value of the pound, though Brexit sensitive stocks like Lloyds, RBS as well Taylor Wimpey, Barratt Developments and Tesco, all helping support the index.
On the companies front WPP shares have slid sharply after sector counterpart Publicis warned on its 2019 revenue guidance, the second such warning in three months. Publicis appears to have been caught out by the move towards digital marketing, away from the more traditional TV and billboard advertising, with Europe a particular source of concern.
There’s been better news for software group SAP after the company posted Q3 numbers that were better than expected, while also reaffirming expectations for this year and next year’s forecasts. The company also announced that Bill McDermott was stepping down as CEO to be replaced by Jennifer Morgan and Christian Klein. The co-CEO model seems to be becoming more popular in recent times but it can be something that is fraught with difficulties. It also speaks to indecisiveness in that the board is reluctant to make a choice, and as such the corporate message can become muddled if there are differences at the top.
Oil prices are also on the rise on reports that an Iranian oil tanker is on fire off the coast of Saudi Arabia, having come under missile attack, from an unknown source. The Iranians may well look to blame Saudi Arabia, with the National Iranian Tanker Company saying that the rockets came from Saudi Arabia.
Coming as it has only weeks after an attack on Aramco’s refining capacity, markets are understandably nervous, however the move higher in prices is still fairly modest, when compared to yesterday’s gains which were driven by speculation about further OPEC cuts
US markets look set to open higher as we head into the weekend ahead of President Trumps meeting with Chinese vice premier Liu He.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.