Reports that China is considering reducing tariffs on US made cars gave markets a boost overnight. European shares surged, led by automakers. Oil and base metals lifted and bonds sold off. However two factors restrained enthusiasm. The British pound slumped to an eighteen month low as traders feared a no-confidence vote in PM May, and US investors bailed on earlier gains after a televised conversation between Democrat and Republican leaders.

The US president threatened to shut down government over funding for a wall on the US border with Mexico. This totemic issue is toxic for both sides of US politics, and could see a prolonged and public spat. Although markets are largely inured  to what are now regular government closures in the US the fragility of investor sentiment saw US stock markets close in the red. Defensive sectors fared best, with good support for consumer staples, utilities and healthcare stocks.

Asia Pacific markets are looking at opening gains after a torrid start to trading this week. However a strong focus on risk may see selling resume despite the improvement in the trade outlook. Regional markets are looking technically weak. However pressure in gold prices and a sell off of bond futures suggest a more growth oriented stance in trading today.