The FTSE 100 has begun the week in a bullish mood, eclipsing it’s previous all-time high and moving into uncharted territory after what appears to be a significant de-escalation in the US-China trade war over the weekend. Risk-on flows can be seen across several asset classes with stocks rising and Gold falling to its lowest level of 2018. The extension of the recent rally seen in the buck has caused the GBPUSD rate to fall back below the 1.34 handle and trade at its lowest level of the year, providing an additional boost to some of the largest UK blue-chips.
US and China on hold
The announcement that the US has halted plans to impose $150b worth of tariffs on Chinese imports is a significant symbolic gesture, and led to Treasury Secretary Mnuchin declaring yesterday that the trade war has been put “on hold”. Beijing has chosen to reciprocate the gesture by promising to “significantly increase” purchases of US farm exports and energy, and it appears that the world’s two largest economies are jointly backing down after a series of tit-for-tat escalations in recent months. Hard-liners from both sides have voiced their disapproval at the latest developments, but on the whole it is pleasing for the markets with the possible negative impact of a US-China trade war posing a very real threat to the global economy in recent months, and as such this de-escalation has been warmly welcomed.
UK stocks make broad push higher
With the FTSE 100 breaking above 7800 for the first ever time this morning it is all the more pleasing considering the breadth of this latest push higher. All but 7 of the 100 shares on the benchmark are in the green, with only Micro Focus and Evraz posting notable declines of more than a few tenths of a percent. The benchmark has now gained over 14% in the 2 months from its March low and with one of the largest macro risks seemingly being greatly reduced with the US-China truce and the pound falling further the outlook is no doubt pleasing. Having said that, given the size of the rally and the fact that we’re entering a period of typically less-favourable seasonality, any signs of weakness in the coming sessions may offer investors an opportunity to “sell-in-May” and take some profits off the table after what has been an impressive run higher.