US equities reverse on trade war headlines

Heading into the close, the FTSE 100 is 40 points higher, enjoying a day of outperformance compared to a mixed session for US markets.

• Kudlow comments sink early rally
• GDP revision blamed on weakening corporate profits
• Pound remains weak as Parliament seeks to find a way forward

Once again the sound of dashed trade war hopes can be heard across markets, as Larry Kudlow declares that US-China talks could go on for months. This is no surprise, and the potential length of these talks, and indeed the never-ending Brexit situation, have become something of a running joke across markets lately. It does seem that the positive headlines are outweighed by the negative ones like today’s, although the impact has been relatively muted so far, as early gains on US markets fade away once again. Further bad news appeared in the form of a downwardly-revised US GDP figure, with a drop in corporate profits as the tax cut stimulus faded providing the main reason for weakness. This  will put investors on edge as they head towards the next earnings season, set to begin from mid-April, which is widely-expected to herald a further slowdown in corporate profit, albeit coming off a very strong performance over the last few quarters. 

GBP weakness continues to drive the FTSE 100 higher, providing some crumb of comfort to UK investors who are resigned to months of uncertainty. Parliament now needs to push towards fresh votes that strip away the least popular options last night, although this will have uncomfortable echoes of the repeated efforts to get the Meaningful Vote through. Until a clear alternative emerges, it seems difficult to envisage a way out of the impasse.