Indices drift lower as positive newsflow fades

In mid-morning trading, the FTSE 100 is 30 points lower, as indices edge lower following the late rally last week.

- Equities drift down following trade talk rally

- Outlook still strong for Q4 gains

- Hopes of Brexit deal dim

Some of Friday's trade war and Brexit euphoria has worn off, particularly for equities, but overall indices find themselves in much stronger form than they did a week ago. Even if this is only a partial trade deal, with plenty of issues left to solve, the mere fact that the US and China were able to get together to hammer out agreement on some issues provides hope that this pernicious issue could be resolved eventually. The situation for equity markets in Europe and the US is remarkably similar – having rallied hard over the previous two sessions, markets find themselves either at or near to previous highs for the year. Something is now needed to drive them onwards from here, and trade progress would be just the kind of catalyst that would allow indices in Europe and the US to take advantage of positive seasonality and drive higher from here.

The drop from Friday's high for sterling against the dollar and the euro might also provide a buying opportunity for those brave enough to expect further progress towards a UK-EU deal. There was little progress over the weekend to back up the promising talk of last week, and hopes of a deal may well founder on the rocks of detail like backstops and customs deals.

Ahead of the open, we expect the Dow to start at 26,813, down 3 points on Friday's close.