Global stocks push for elusive record high on optimistic trade hopes

On Wednesday, Global stocks made another push for an elusive record high after President Trump said the U.S. and China were on their final throes of a first trade deal.

Earlier on, the European trading was relatively subdued, with MSCI’s all-country world index now within 0.4% of its record high from January 2018 but lacking the urgency.

Frankfurt, London, and Paris were all inching higher. Shanghai struggled after the industrial company profits shrank while Australian shares had hit record highs. Japanese stocks drew support from the growing chances of extra fiscal stimulus.

A senior official from the Japanese ruling party said he believed the government was striving to compile a supportive spending package worth about 10 trillion yen ($92 billion)

“Something will come out of phase one (Sino-U.S. trade) talks. Rolling back tariffs to where they were in August with the December ones put on hold or canceled-maybe,” said T.D. Securities Senior Global Strategist James Rossiter. 

However, he said the two countries were unlikely to go beyond that. Also, data on Chinese industrial profits underscored the economic strain.

Currency markets

The USD was broadly stronger against other developed and emerging currencies. The dollar-yen held above 109 and euro/dollar steady.

That was despite the Tuesday’s softer-than-expected U.S. economic data, which showed a fourth straight monthly contraction in consumer confidence. There was also an unexpected drop in home sales in October.

The GBP continued to edge lower as pre-election opinion polls showed some narrowing of Boris Johnson’s Conservative lead over opposition parties – even though he remains favorite to gain an overall majority.

The reaction towards the poll narrowing has been modest as the prospect of another hung parliament raises the possibility of some form of a coalition government made up of parties supporting a second Brexit referendum.

Kay Van-Petersen, the Global macro strategist at Saxo Capital Markets in Singapore, said while Sino-U.S. trade headlines may be driving some tactical, near-term moves in the market, they were mostly just “noise.”

The broader market direction is “about the accommodative Fed, accommodative monetary policy, and the fact that structurally the meta-trend is still lower in yields and rates,” he said.

According to some analysts, a renewed fall in U.S. and European bond yields on Tuesday also pointed to more mechanical explanations beyond trade for rising equity prices.

Fed Chair Jerome Powell said on Monday that monetary policy was “well-positioned” to support the strong U.S. labor market.

Emerging markets

In emerging markets, traders kept a close eye on Brazil’s real, which hit a record low below the troughs hit during the deep recession of 2015- despite the ongoing central bank intervention.

Among the primary commodities, oil prices edged lower after hitting their highest since late September on the reassuring trade headlines. 

The U.S. West Texas Intermediate crude was down 0.21% at $58.29 per barrel. Global benchmark Brent crude lost 0.11% to $64.20 per barrel.

Traditional safe-haven gold changed hands at $1,458.33 per ounce on the spot market, down 0.2% on the day but also heading for its worst month in almost three years after a 3.5% drop.