Stocks surge, despite heightened BoE rate hike expectations

A rise in UK inflation did little to excite forex traders, who instead focused on the lack of a breakthrough in Brexit talks. US stocks surged to new highs fuelled by improved earnings from banks Morgan Stanley and Goldman Sachs

• Stocks surge as risk appetite improves

• UK CPI rise fails to excite GBP traders

• US financials gains after positive earnings

Global stocks have enjoyed another day of gains, with the now customary record highs in US indices this time driven by an outperformance in the banking sector. The dollar strengthened, with European currencies losing ground amid uncertainty fueled by Catalonia and Brexit. With the yen and gold losing ground, there is a clear shift into risk assets to the detriment of perceived havens.

One of the chief losers today has been the pound, which failed to rally on the back of a rise in CPI. Markets chose instead to focus on Theresa May's apparent failure to break the deadlock in Brexit negotiations.

With UK inflation now standing at 3%, there is sufficient pressure on the Bank of England to act in November. However, with the UK economy continuing to stutter, there is a clear reasoning behind the notion that any rate rise would simply create leeway for a like-for-like rate cut when the going gets tougher.

The latest US earnings season is underway, and US financials are heading higher in the wake of impressive figures from Goldman Sachs and Morgan Stanley. Once more bond trading is in the spotlight, with FICC trading revenues falling across the top 5 US banks. However, the impressive overall profitability in US banking does help instill confidence in an environment of rising rates.