US-China deadline extension helps markets

The US and China may be nudging closer towards finding some middle ground in their nearly year-long trade dispute, a resolution that would give markets some breathing space going forward and potentially even reverse some parts of the global economic slowdown.

President Trump indicated yesterday that he might extend the 1 March deadline for the two sides to reach an agreement if it seems that enough progress has been made in their bilateral talks and thus avert the planned introduction of yet more trade tariffs on Chinese goods. Chinese stock markets cheered with a 2% increase to a multi-month high in early trade and European markets followed with a rally, particularly in Germany where a lot of car producers and industrials depend on exports to China. In London, Rolls Royce and luxury brand Burberry were high up among the gainers, as were metals and mining companies.

Congress border deal boosts US stocks

The US government narrowly avoided a shutdown scheduled for this week thanks to a face-saving deal between President Trump and the Congress which allows both sides to claim success. Instead of the $5.7 billion worth of funding to finance the building of a wall on the US border with Mexico Congress agreed to provide $1.375 billion for border security, offering a way out of the impasse that has been paralysing US government offices since December.

The decision brought palpable relief to US markets and continued to boost Asian and European stocks this morning. The dollar’s reaction was mixed as it firmed slightly against the yen but nudged into weaker territory against the euro and sterling.

Brexit uncertainty continues

The pound is left without clear direction as Britain seems no closer to any clarity over Brexit. Sterling is almost flat against the dollar and marginally stronger against the euro but the strengthening seems more temporary than a clear trend.

The Prime Minister is due to present her updated Brexit proposal to the Commons today with changes from the EU on the Northern Ireland backstop and in theory this is due to be followed by a Valentine’s Day debate on the update. But comments from Brussels and the opposition are not providing much hope for a resolution.