Spreadex Market Update

Potentially ill-founded optimism drives markets higher, sterling stuck on Brexit



The Dow Jones gradually began to match the ill-founded optimism – or, at least, the dimming sense of immediate anxiety – seen during the European session.

If investors were to try and explain Tuesday’s rebound, then it wouldn’t be a surprise to see Trump’s tweets cropping up in the answers. The social media President spoke of his ‘unlimited’ respect for, and friendship with, China’s Xi Jinping; the potentially compromise-suggesting claim that the US needs to make up ‘some’ of the trade ground lost to its superpower nemesis; and the reiteration that ‘China wants a deal’ and that it will all happen ‘much faster than people think’.

The perception that a deal isn’t out of the question, especially with a G20 summit in Japan next month, allowed the Dow Jones to jump 180, pushing it back above 25500 but leaving it around 250 points short of yesterday’s open. The CAC, meanwhile, held onto a 1.2% increase, with the DAX rising 0.6%, its comparative sluggishness due to a disappointing German ZEW economic sentiment reading. The FTSE was similarly consistent in its gains, its 0.9% rise causing it to tease 7240.

Though the trade war talk remains the market’s focus, the pound wasn’t interested in anything but Brexit. A mixed-bag jobs report had helped ease the currency’s losses earlier in the day, only for Labour’s claim that there’d been no ‘significant shift’ from the government towards a cross-party compromise – even if the Cabinet has agreed to continue the talks – to drive sterling lower. Cable tumbled 0.4%, leaving it at a 2-and-a-half week low, while against the euro the pound was down 0.2% and at its worst price for approaching 3-months.

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