There’s been a swift move lower in European stock markets and US futures in recent minutes after news hit that China reportedly wants further talks before signing the trade deal discussed last week. The deal itself was fairly underwhelming when announced late on Friday with an increase in agricultural purchases and the avoidance of a marginal increase in the rate of levies seen as the bare minimum expected from the markets. The failure to even get this agreed upon is worrying and seeing as this is “phase one” of Trump’s self proclaimed big deal, there is now serious doubts as to whether phases two and three will ever even get off the ground.

 

Pound pares gains as Brexit talks continue

After ending last week with the largest 2-day gain in a decade, the pound has pulled back a little in recent trade as the markets almost euphoric reaction to positive remarks from the EU on the prospect of a Brexit deal has been checked a little. Over the weekend there was some less positive noises out of Brussels with one EU diplomat stating that there was “no breakthrough yet” and another going further in claiming that today’s talks would the the “one last chance” for an agreement. Negotiations are ongoing between the two parties ahead of the EU summit which begins on Thursday and while we’re no doubt in a far more positive position than we were this time last week the latest comments are a timely reminder that nothing has been agreed upon yet. 

 

FTSE dips to start the week

There’s also been a little bit of softness seen in UK stocks with the FTSE drifting back near the 7200 handle. Last week saw the FTSE rise, but the gains were small compared to many of its peers with the sharp appreciation in the pound weighing on the blue-chip index. While the benchmark as a whole is a pretty poor Brexit-proxy there are several sectors that have been exhibiting a positive correlation to the pound on this front with banks and housebuilders the most obvious. 

Friday saw huge gains for banks in particular with Lloyds and RBS jumping over 10% and Barclays wasn’t far behind in rising by 7%. Given the pullback in the pound this morning it shouldn’t come as too much of a surprise that these shares are amongst the biggest laggards on the FTSE, but in a similar manner to sterling they still remain far higher than where they did just a couple sessions ago.

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