Europe is looking a little flat ahead of the open on Wednesday, failing to capitalise on the positive momentum that lifted stocks in the US and parts of Asia overnight.
Sentiment was buoyed late on Tuesday by reports that US trade negotiators will head to China on Monday for face-to-face talks. While there’s obviously no guarantee that anything will come from the talks, it’s clearly a positive development that suggests both sides believe progress can be made. And lets face it, anything that brings hope in this increasingly murky environment is always welcome.
As ever, it feels like it’s two steps forward and one step back on the trade front though, after EU Trade Commissioner Cecilia Malmstrom claimed the bloc has tariffs prepared if the US follows through on threats to slap them on European cars.
The US has so far held off on getting involved in a full blown trade conflict with the EU, probably due a desire to not fight a trade war on two fronts. But it’s not like Trump to shy away from a tussle and these comments may just trigger a Twitter backlash against the EU.
Pound steady as Johnson prepares to enter Number 10
Boris Johnson’s ambitions to be Prime Minister have long been known but today, he will finally enter into Number 10 and begin his bid to take the UK out of the European Union. His victory probably comes three years later than he expected but the man repeatedly claimed prior to the referendum that he had no desire to be PM, probably enters Downing Street in a much better position than he otherwise would have.
GBPUSD Daily Chart
Much of the mundane details of the split have been agreed on by Theresa May’s team and there is now a sense of desperation from Brexiteers that very much suits him. Now he just needs to get the EU to back down on issues he previously claimed were straightforward or drag Parliament out of the block kicking and screaming without a deal. Simple.
The pound has been relatively flat since the announcement, highlighting just how much his victory was already priced in. We haven’t yet seen any profit taking kick in though which may be traders waiting to see the make-up of his cabinet or could signal ongoing nervousness around the risk of no-deal under his leadership. The sell-off has lacked momentum in recent weeks which may suggest the former but I’m sure that will become a lot clearer in the coming days.
Deutsche Bank (DE:DBKGn) posts huge second quarter loss
Deutsche Bank posted a larger than expected €3.1 billion loss in the last quarter after the banks profits took a massive hit from the huge restructuring efforts that will include 18,000 staff being let go. The bank claims that without the charges, net profits would have been €231 million, still shy of the €401 million a year earlier, but that a substantial portion of the restructuring costs will be absorbed in the quarter. The restructuring is a big and expensive gamble for the bank but one that many have thought necessary for some time.
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