Shares in Europe and on Wall Street are set for a higher open on Thursday after a positive session in Asia.

Wall Street notched up new records and finished the day higher after the signing of the phase one US China trade deal. That the S&P 500 and Nasdaq both turned lower during the day, and that gold finished the day higher demonstrates the hesitation felt by markets about the deal. Investors are still optimistic that the deal prevents further escalation. But now it has been inked, questions are being raised about how much it really does for global growth.

Other factors at play were a disappointing set of results from Goldman Sachs with a rare second quarterly earnings miss in a row. Goldman’s results undermine the strong start to US earnings season led by the record profits at JP Morgan Chase. However, the cause of the disappointing earnings from Goldman was less to do with the underlying performance of the bank and mostly because it was setting aside large  provisions for its involvement in 1MDB.

The FTSE 100 looks set for a positive start on Thursday, with the index tracking the progress of the US China trade war . The UK index is seeing very little benefit from the recent onset of weakness in Sterling. The FTSE 100 remains stuck beneath the 7650 level.

The British pound has since recouped losses made after data showed UK inflation grew at a slower pace than expected in December. Expectations were missed across a range of calculations for inflation, including consumer prices, retail prices and producer prices. The softer UK inflation is increasing expectations that the Bank of England will cut interest rates in the coming months. Market odds for a BOE rate cut this month are now as high as 60% from zero a week ago. We think a rate cut this early is premature. The rhetoric from central bankers certainly increases the chance of a January rate cut, but the strength of the UK labour market and timing of Britain leaving the EU within days of the rate decision suggests to us it won’t happen.

The DAX looks set for a positive open on Thursday before the release of German inflation data. Record highs are still proving elusive for the German benchmark. It is telling that Germany’s DAX, one of the European indices most exposed to trade in China finished lower on the day. The relative weakness in the DAX could in part be related to the strength in the euro, which would be another factor undermining Germany’s export endurance. EURUSD rallied back over 1.11 as real German GDP came in at 0.6% for 2019.This morning we’re looking out for German CPI, which is expected to hold steady since last month at 1.5% y/y and 0.5% m/m.

US retail sales will be reported at 13.30 GMT with expectation for a rise of 0.3% after 0.2% previously.


Europe Opening Calls

FTSE 100 to open 1 point higher at 7643

Dax to open 9 points higher at 13,441

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