Positive comment by Trump on Sino-American trade talks drives equities higher
Hopes of a resolution to the US-China trade dispute appear brighter. US President Donald Trump’s recent comment that talks with his Chinese counterparts are very productive, and the release of Huawei Technologies CFO Meng Wanzhou on bail, have given the markets some relief. Recent reports suggest that Chinese officials even agreed to cut tariffs on imported cars by 15% from 40% following discussions on Monday, an announcement that allowed US carmakers and EU auto stocks to rally. Germany’s Daimler, BMW and Volkswagen flagship automotive companies bounced by +2.69%, +1.83% and +1.49% respectively.
Asian indices have been closing in positive territory and are green across the board. The Japanese Topix index gained +1.99%, bouncing back from an 18-month low, while Hong Kong’s Hang Seng rose by +1.61% and China’s mainland CSI 300 budged +0.34%. European equities are similar, with the Euro Stoxx +0.90, German DAX +0.70% and the French CAC40 +1.09%.
EUR/USD is currently trading at 1.1327, approaching 1.1340 short-term.
UK PM under threat as vote of no confidence is triggered
Following Prime Minister Theresa May’s postponement of the final vote on her Brexit deal on Tuesday, rebel members of the Tory party have now decided to challenge her leadership. The rebels have the required 48 votes of party members to trigger a vote of no confidence by all 315 Conservative MP between 6 and 8 PM GMT today. A total of 158 votes would force Theresa May to step down and open the door to a party leadership contest.
Because Parliament would need weeks to find an agreed candidate, considerable time and effort would be spent on a doubtful cause since a new leader would face the same issues going forward. Under such circumstances, it seems improbable that the rebel Tories will be able to gain the support of 158 MPs.
Accordingly, despite a bounce back during this morning’s trading session of the pound, we expect further volatility on the forex market. GBP/USD is currently trading at 1.2539, heading along 1.25 short-term.
