MacroWatch – Stocks surge on US-Sino and Brexit deal hopes

Intermediate
  • Geopolitics came back with a bang last week with a Thursday breakthrough in Brexit negotiations as the Governments in the UK and Ireland declared progress regarding the issue of the Irish border and backstop. This advance was reinforced Friday after positive talks between UK officials and those in the European Union, with more intensive talks as the counterparties were said to have “entered the tunnel”. Financial markets now see the likelihood of a Brexit deal as increasingly more likely, with declining danger of a no deal Brexit
  • Alongside the Brexit breakthrough, the US-China trade talks, concluded Friday with a “Phase 1” trade deal confirmed by President Trump and China’s Special Envoy and Vice Chairman, Liu He. Rumours of progress had seen global stocks rally through Thursday after choppy activity before talks had started, with the partial deal said to include intellectual property, agriculture and currencies, alongside the US suspending tariff hikes due to take effect in October.
  • The main impact of the Brexit progress and US-Sino, partial trade deal was to launch the Pound higher Thursday-Friday, with the GBPUSD currency rate surging from 1.22 to 1.27. In addition, global stock markets pushed significantly higher, safe haven bond markets went lower whilst on elsewhere in the Forex arena, the Australian Dollar rallied and the Japanese Yen weakened, as a “risk on” theme was reinforced.
  • The other significant political event has been the furtherance of the impeachment enquiry of US President Trump. Financial markets have somewhat disregarded impeachment risks with the focus on the US-China trade discussions and Brexit, though we continue to emphasise, this threat will probably have significant influence on markets into latter 2019 (and beyond into 2020).
  • Not to be overlooked is the heightened tensions and conflict on the Syrian-Turkish border. Although global financial markets have only had muted reaction to this (the Turkish Lira has weakened to a four-month low), any escalation of this conflict will likely impact global financial markets.
  • Brexit talks will be a key focus this week with the European Council Brexit Summit on Thursday and Friday (17th-18th). The International Monetary Fund (IMF) and World Bank’s autumn meeting is on all week in Washington D.C. and alongside the economic data as below we get the US earnings season properly begin, starting with the financial companies and banks.

Key this week

Date Key Macroeconomic Events
14/10/19 IMF and World Bank Meeting starts (all week); China trade data
15/10/19 Reserve Bank of Australia Meeting Minutes; China Consumer Price Index; UK Employment report; German ZEW Survey
16/10/19 UK inflation data; US Retail Sales; Canadian inflation data
17/10/19 EC Summit on Brexit; Australian Employment report; UK Retail Sales
18/10/19 EC Summit on Brexit; China Gross Domestic Product

Steve Miley

Editor in chief

Steve Miley has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Market Chartist, the Editor-in...continued

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