Stocks soar on trade war and election double whammy

Global markets are closing out the week on a high, with the US-China breakthrough and Conservative landslide improving sentiment. In the UK, housebuilders and banks lead the way, as the fog clears from years of uncertainty.

• US-China deal sparks market surge
• Banks and housebuilders lead domestic rally
• GBP eases back after sharp post-election appreciation

Global markets are on the rise today, with two long-running sagas being resolved within hours of each other. The phase one US-China trade deal focuses on increased Chinese purchases on agricultural products, in exchange for a lessening of the current tariffs in place. The sceptics will note that China has hugely cut down on their purchases of US agricultural goods, and thus the devil will be in the detail to note whether this is really the boon Trump insists it is. However, for markets this breakthrough is hugely notable as it eases the shackles placed upon a country which remains one of the biggest drivers of economic growth. Sentiment-wise, the events of this week will certainly have a  material impact, with many hoping to see high street spending and business investment jump as we close out the year. With US stocks reaching record highs, it seems that Santa is coming in a very different form this year.

The FTSE 250 has enjoyed an incredible end to the week, as the prospect of a business-friendly government is enhanced by a simultaneous phase one trade deal between the US and China. Chief amongst the gainers has been highly domestically orientated firms such as the housebuilders and UK-focused banks. The big question now is quite the degree to which business and investors alike will begin to open the financial taps after this huge cloud of political and economic uncertainty is lifted (for now).

The pound has spent much of the day drawing back from long-term highs established overnight. To some extent this could be an element of ‘buy the rumour, sell the fact’. With sterling having gained 8% in the month leading to this election, the somewhat controlled surge in the pound reflects the fact that markets had explicitly prepared for a Conservative majority. The optimists out there believe that Johnson could use his substantial majority to ensure the UK leaves with a good deal rather than a quick deal. However, the outlook for Brexit trade negotiations remain unclear, with clarity likely to provide direction for the pound going forward.