Trade deal enthusiasm sends stocks higher

Positivity from the Asian markets overnight flowed through to the European session and also set Wall Street off on the front foot. News that the US and China were nearing a trade deal saw investors putting risk back on the table. Let’s not forget a trade deal between the US and China would be a sizeable catalyst for global markets. Trade tensions and the impact on global growth pulled the Dow from its all-time high in September and just on the suggestion of the two leaders meeting stocks are significantly higher.

The Dow opened higher and has since pared gains as trade deal enthusiasm starts to cool. This is certainly not the first time that we have heard this headline and I am quite sure it won’t be the last. Given the rally that we have so far across the start of the year, markets are pricing in a positive outcome from this trade dispute. More attention will start to be placed on China and the possibilities of a resurgence in growth.

The FTSE led the charge in Europe, climbing higher than its European counterparts’ thanks in part to the weaker pound.

Pound drops as construction sector slips into contraction

Despite a strong start for the pound, dismal construction sector data and a strengthening dollar, saw cable drop below $1.32. The UK construction sector slipped into contraction in March, dropping to 49.5. This is the weakest reading for the sector since March last year. Brexit uncertainty slowing business decisions, holding up investment and builders unable to get the materials required amid increased stockpiling are hitting the sector. The pound dropped lower on the release, falling below $1.32. It is currently encountering resistance at $1.3180, a meaningful break through this level could open the doors to $1.3160.

With manufacturing and construction showing the impacts of Brexit, traders will look towards the service sector pmi tomorrow. The dominant service sector grinded to a halt in January and the expectation is that February wasn’t much different. Given broad weakness across all sectors of the UK economy, it is difficult to see how the Britain will avoid a contraction in the first quarter.

Dollar shrugs off Trump’s comments

Dollar was resilient on Monday, moving higher versus the pound and the euro as traders shrugged off Trump’s efforts to talk down the dollar. As trade talk optimism boosted treasury yields, the dollar followed suit.

Euro struggles ahead of ECB announcement

The euro was a noticeable decliner on Monday as investors look ahead to the ECB rate announcement later this week. Speculation of further monetary easing for the region is dampening demand for the euro. There is a good chance that investors are getting ahead of themselves here. A decision to this effect would be admitting that the end of QE in December was in fact a mistake.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.