The FTSE started the day stronger, building on a positive close on Wall Street caused by M&A news and a rally in Chinese markets prompted by a relaxation of infrastructure funding. More domestic M&A activity for Smith & Nephew (LON:SN) and Compass group also helped the index’s performance.
China stocks surge despite hot air
The Shanghai Composite Index rose 2.58% overnight despite a flurry of negative headlines about President Trump's comments directed at China. While President Trump did say that the US would raise tariffs on China if President Xi Jinping doesn’t attend the G20 summit in Japan later this month the market read it as hot air rather than substance because so far the Chinese president has neither made any indication that he wouldn’t attend the summit nor that he would avoid meeting President Trump.
The Osaka summit will be the ideal opportunity to mend the strained relations between the two countries. Chinese stocks were also supported by a key change in Chinese policy on funding local government infrastructure projects.
The DAX, which is heavily dependent on Chinese demand, bounced up more than 1% on China news.
UK jobless data to colour sterling trade
UK jobless data due later this morning will set the tone for sterling trade, helping the pound find direction after it traded nearly flat against the dollar late Monday.
There was surprisingly little movement in the currency after the Bank of England’s chief economist Michael Saunders said that the central bank may have to raise interest rates sooner than the markets expected. Instead focus started shifting onto the Tory party leadership contest that will begin in earnest today after the deadline for nominations expired Monday.
Sterling trading could become more volatile as candidates come up with louder and louder headlines to try and vie with the rest of the party members and voters.
Oil stabilises ahead of OPEC meeting
Oil prices dipped after European markets closed yesterday but since then have gradually clawed their way back to $62.68. The main supportive factor is Russia’s nod to OPEC that it will likely extend the production cuts the oil producers agreed on in December.
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