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U.S.-China Trade Truce Lifts European Stocks

Published 01/07/2019, 10:55
Updated 14/12/2017, 10:25

The much anticipated Trump-Xi Jinping meeting in Osaka delivered as expected, not a full on resolution of the trade dispute between China and the US but some form of truce that includes picking up the broken off trade negotiations between the two countries. For the time being the existing import tariffs will remain in place but the markets will live off the hope that the resumption of the discussions between US and Chinese trade representatives will help lift those sooner rather than later.

European markets are uniformly higher, particularly the heavily China-exposed DAX which is trading up 1.44%. The FTSE is also trading higher, up 0.91%, being lifted by investment trusts, banks, miners and oil producers. Fresnillo (LON:FRES), however, is the top faller after the company warned that profits could take an $80 million hit on a tax adjustment exercise.

Oil rallies ahead of Vienna OPEC meet

The sidelines of G20 normally provide ample market moving material and the summit in Osaka did not disappoint. A comment from Russia’s president Putin confirming that Russia and Saudi Arabia have agreed to extend the existing OPEC and Russia oil production cuts lifted Brent crude prices by nearly 3% Monday morning.

Prices are rallying as OPEC is about to start its six-monthly meeting on production levels from member countries which is ultimately expected to confirm the agreement with Russia and extend production cuts by six to nine months. Whether the cuts are necessary at this stage is another matter given that the tensions in the Gulf are already lifting prices. However, domestic US data is still showing high levels of available stocks in the country and for WTI prices to be supported the producers who would need to scale back output are US oil producers rather than OPEC members.

Pound drops as UK manufacturing contracts

The pound is plunging this morning after UK manufacturing data showed a decline to the lowest level in six years. Sterling is down 0.34% against the dollar as the PMI showed a serious contraction in UK manufacturing, down at 48.0 in June from 49.4 in May.

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