White House China comments help European markets

European markets opened stronger, taking their cue from a moderate rally in Asia, brought on by positive comments from President Trump’s economic advisor Larry Kudlow ahead of the meeting between the US and Chinese presidents this weekend.

Metal prices are on the mend from their decline Tuesday and are helping mining companies climb up the leader board of FTSE gainers. Banks and insurers are also notching higher.

Trade indigestion

Kudlow did not come out with any specific promise or undertakings; instead he said that there was a possibility of a breakthrough in trade talks between China and the US. However, this was enough for the market to interpret this as a sign that after a protracted dispute the US was getting ready to strike a deal on trade with China. The comments came a day after Trump repeated threats about increasing import tariffs on Chinese good in a scare tactic seen previously in his trade negotiations with Mexico and Canada. Trump and China’s president are due to sit down for dinner in Buenos Aires on Saturday evening, until then the market is likely to suffer indigestion from being pulled in different directions every day. In China the Shanghai Composite traded up 0.7% and the smaller-cap Shenzhen Composite was 0.5% higher.

BoE to publish Brexit scenario assessments

The pound is tentatively higher against the euro but still struggling against the dollar as traders await some clarification over Brexit from the Bank of England and the government later today. The BoE will publish its regular Financial Stability Report and the results of its 2018 banks’ stress test at 4.30 but in addition to that will also lay out its assessment of what the different Brexit scenarios will do for interest rates and the banking sector. A no-deal Brexit will in no way guarantee a decline in interest rates as the UK economy is slowing down and inflation is on the rise, according to previous comments made by BoE’s governor Mark Carney. But any more clarification on possible scenarios will be welcomed by the market and help make an assessment on how currencies and bonds will fare over the coming months.