Shaking off the doubts that plagued Monday, the markets were back in optimist-mode on Tuesday, in regards to both Brexit and the US-China trade relationship.
Sterling very much chose to focus on the positives. While Michel Barnier was keen to stress it has become ‘more difficult’ to reach an agreement this week, stating that it is ‘time to turn good intentions into legal texts’, his claim that it is ‘still possible’ for the UK and EU to come together on a deal was enough to restore the pound’s faith in proceedings, even if other members of the bloc were less convinced.
Cable climbed 0.6%, returning to the $1.265-levels struck last Friday, while a 0.7% increase against the euro actually sent sterling to a fresh 5-month high of around €1.1487.
Of course, this had the side effect of inhibiting the FTSE while its peers were charging forth. Though the European markets weren’t particularly receptive to the ‘partial trade deal’ reports from over the weekend on Monday, a strong Asian session greenlit some substantial growth this Tuesday.
The DAX was at its best levels since early July after adding 100 points, with the CAC knocking on the door of a 2-week peak of 5700 following a 0.9% rise. In contrast, the FTSE could only scrape together a 0.2% increase, keeping it above 7200 but leaving it well short of the 7400-highs seen at the start of October.
Looking forward to the rest of the day, and the market’s resolve may be tested by a few key bits of data. For the UK, the latest jobs report is expected to see wage growth (including bonuses) and the unemployment rate hold at 4.0% and 3.8%. For the Eurozone things could be trickier: the region-wide and German ZEW economic sentiment readings are set to worsen month-on-month, sinking to -26.7 and -27.0 respectively.
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