News yesterday that President Trump has agreed to delay tariff increases from the March 1 deadline spurred market optimism and helped global stock indices to continue with their strong start to the year. The major US indices are now all sitting comfortably up over 10% for the year with the Nasdaq the front runner at 13.85% followed by the Dow Jones and S&P at 11.85% and 11.54% respectively. The dollar dropped off again against most of the majors with the exception of the Yen and Cad, the Dxy back down around the 96.40 level. The pound continued to climb with news that PM May could look at postponing Brexit hitting the wires, Cable back around 1.3100 and EurGbp at 0.8670. Oil took a big hit after a tweet from President Trump calling Oil prices too high and telling OPEC to ‘relax’came out, WTI and Brent both losing over 3% on the day.
Global stock market increases were not huge yesterday, with the notable exception of the Chinese CSI index (up 6%), as the tariff move from the US side had been greatly anticipated by the market. However it is considered another step in the right direction for global growth and on a day with little else in the way of fresh catalysts it helped maintain positive investor sentiment. There were caveats on the proposed trade deal as well, with reports out of China that there are still uncertainties and Trump declaring that a deal might not happen at all. Although largely ignored by the market yesterday, they suggest that the path forward will not be a straight one and investors will do well to prepare for more volatility.
Likewise, news that Prime Minister May is considering the option of postponing Brexit given all the turmoil in parliament can hardly come as a big surprise, but the pound did appreciate as it is considered a more positive outcome in the current environment than a hard ‘no deal’ exit – however once again details are few and far between. Once again the market will seek further clarity over the coming sessions and if it is not forthcoming sterling traders can expect more swings in the currency.
Looking ahead to todays trading sessions and it’s a quiet day in terms of fundamental data releases. The Asian session is bereft of any indicative data and investors will once again be closely monitoring the news wires for any updates on the major issues, especially anything new from China on the trade negotiations. In the London session the focus will switch to the UK, not only from a Brexit perspective but the MPC Inflation Report Hearings are due early in the day. The major focus of the US session will be the start of Fed Chair Jerome Powell’s Semi-annual Monetary Policy Report to the Senate Banking Committee but we are also due to have the release of the latest Consumer Confidence data earlier in the day.