Markets are in rally mode as the Friday close looms in London, with triple-digit gains for the Dax and Dow and a healthy bounce for the FTSE 100 too.

  • Hopes of progress in Brexit and trade wars spur risk appetite
  • FTSE bolstered as banks surge
  • Trump sounds upbeat on chances of trade progress

Deals are in vogue on both sides of the Atlantic it seems, as the UK and EU attempt to build on yesterday’s Varadkar/Johnson summit, and Trump prepares to meet the Chinese vice premier to hammer out an agreement. Despite indications that there is a) still a long way to go before any deal is passed, and b) that it might not be completed before 31st October and c) it still faces tough hurdles in Parliament, markets have enthusiastically engaged with the idea that the UK and the EU may yet hammer out some kind of deal that allows Brexit to take place and avoids a no deal scenario. UK and EU banks are both surging, a sign of how much Brexit has weighed on the continent’s financial sector, with  the 12% gain for Lloyds adding 18 points to the FTSE 100 for the day. Of course, a stronger pound is hurting the index as well, with key names such as British American Tobacco, Diageo and GSK all weighing heavily as investors worry about the impact of sterling. But investors should be careful – it is a long journey to the EU summit, and if details of the new plan start to leak we may find the various sides pouring cold water on it.

Meanwhile in Washington the US and China are still looking to hammer out a deal too. Equity markets have rather taken it as a given that something will be done, and have attempted to replicate last week’s rally with the aim this time of continuing into the rest of the quarter. Again, the risk of disappointment is high, but even the president seems keen on getting something done. But a partial deal still leaves plenty of room for fallout further down the line, something that should give investors pause for thought.



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