European equites enjoyed a massive rally yesterday. A belief that trade talks between the US and China were going well lifted sentiment. It was understood that representatives from both sides were engaging in discussions. President Trump was tweeting positive things about the discussions too. Stocks have fallen considerably in recent weeks, and any whiff of positive news can trigger bargain hunters, especially in relation to US-China relations.
US stocks had a volatile session, as initially the market rallied over the China hopes, but then President Trump warned he would shut the government down if the Democrats tried to stop him building ‘the wall’ along the Mexican border. The Dow Jones and the S&P 500 finished fractionally lower, despite being well into positive territory earlier in the session.
Asian stocks rallied overnight after the Huawei CFO, Meng Wanzhou was released on bail. President Trump said he would consider involving himself in the case if it would help him get a trade deal.
Sterling continues to be held back by Brexit. The pound was dragged lower when there was talk of a no confidence vote against Prime Minister May. May’s withdrawal agreement is so unpopular, she herself had to defer the vote to avoid the humiliation of it being defeated, but it might be difficult finding someone to replace her. Subbing in a new Prime Minister this far gone in the game might be too little too late.
The UK economy continues to chug along nicely. The unemployment rate held steady at 4.1%, and average earnings excluding bonuses grew to 3.3%. Wages are comfortably outstripping the inflation rate so the British worker is getting a ‘real’ increase in salary.
The anti-establishment coalition in Italy are in a better bargaining position now that Emmanuel Macron pledged tax cuts and increased public spending in a bid to halt the protests in France.
The oil market got a nice lift yesterday too on the back of the optimism surrounding US-China relations. China is a major importer of oil and suggestion that the trade spat between the two counties is coming to an end should boost the commodity. Oil, has lost a considerable amount of ground in the past month, and buyers are seeking out excuses to snap up relatively cheap oil.
At 1:30pm (UK time) the US will announce the latest inflation data. The headline inflation report is tipped to be 2,2%, down from 2.5%, and the core CPI reading is expected to 2.2%, which would be an improvement on the previous month’s 2.1%.
EUR/USD – has been diving lower since late September and if it holds below the 1.1510/00 region, it could pave the way for the 1.1215 area to be retested. A move to the upside could run into resistance at 1.1533 – the 100-day moving average.
GBP/USD – has been broadly pushing lower since September and if the bearish move continues, it might target 1.2365. Resistance might come into play at 1.2750.
EUR/GBP – surged in mid-November and if the bullish trend continues it might target 0.9100. A drop below 0.8837 – 200-day moving average, might bring 0.8800 into sight.
USD/JPY – the upward trend that began in March is still intact, and if the positive move continues it might target 114.73. Support might be found at 111.39.
FTSE 100 is expected to open 62 points higher at 6,862
DAX is expected to open 105 points higher at 10,885
CAC 40 is expected to open 46 points higher at 4,852
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