Stocks gain despite headlines on the trade war and the GBP shines

Stocks gain despite headlines on the trade war and the GBP shines
Written by:
Andia Rispah
5th December 2019
  • Stocks kept the faith amid trade war headlines
  • The GBP rose to its highest in more than two years against the euro
  • Hopes next week's election win leading to a smooth Brexit.

Stocks kept the faith amid trade war headlines on Thursday. The GBP rose to its highest in more than two years against the euro on hopes next week’s election win leading to a smooth Brexit.

Hopes for a trade deal stemming from Bloomberg’s report on Wednesday, following Trump’s remarks that talks were going on well. Trump had said earlier that an agreement might have to wait until after the U.S. elections in Nov 2020.

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The U.S. will effect more tariffs on Chinese goods on Dec 15 if the two countries don’t reach an agreement.

People are a bit exhausted of the pump and dump around the trade deal news flow,” said Saxo Bank’s head of F.X. strategy, John Hardy.

The pan-European STOXX 600 rose 0.4%, mainly driven by utilities, healthcare, and real estate shares. 

France’s CAC rose 0.7% while the trade-sensitive German blue-chip index was little changed.

Luxury stocks were in focus after a report that Gucci-owner Kering held “exploratory” talks about a potential deal with Italy’s Moncler, though the latter said there were no concrete options on the table.

Futures were suggesting U.S. stock markets would open 0.3% higher, ready to extend the previous day’s gains.

The GBP rises to its highest

While the dollar softened against most major currencies for a fifth straight session, the GBP rallied to touch a seven-month high against the dollar. It also rallied a two-and-a-half-year high against the euro after extending recent gains on growing expectations next week’s general election will not result in a hung parliament.

With only a week to go until the U.K. election, the Tory party still holds a sizeable lead of around 10% points over Labour; it has made market participants increasingly confident to the price in a Tory majority and an end to the deadlock in parliament.” MUFG analysts told clients in a note.

By 1250 GMT, GBP was up 0.2% against the USD at $1.3129 and flat against the euro at 84.49 pence.

It is getting quite aggressive here and shows people are pricing in a very smooth Brexit, but that also enhances any shock if there is a hung parliament,” said Saxo Bank’s Hardy.

In contrast to the upbeat tones for GBP, British fund manager M&G Investments =suspended dealing in its flagship U.K. property fund, blaming Brexit uncertainty and weakness in retail.

The yen weakened, ceding some of the previous day’s gains as positive signs about the trade dispute hurt demand for safe-haven currencies.

In a bid to revive growth, Japan’s cabinet approved a $122 billion fiscal package on Thursday. His objective was to support stalling expansion in the world’s third-largest economy amid offshore risks also, as policymakers look to sustain activity beyond the 2020 Tokyo Olympics.

The yield on benchmark 10-year Treasury notes stood at 1.7809%, clinging of the gains made the day before.

Most European government yields nudged higher. 

Oil prices extended their rally ahead of an OPEC meeting, where members are expected to agree on deeper output cuts to prop up prices and prevent a glut next year. 

Brent traded at $63.55 a barrel and U.S. crude $58.65 a barrel. [O/R]

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