FTSE notches higher

The expected signing of the Sino-US trade deal later today is helping to lift the FTSE at the start of the session as did some corporate earnings. Despite the positive mood this morning it is impossible to escape the effects of the drawn-out trade conflict. In Europe, the German economy has been hit the hardest, reducing the growth of its GDP to the slowest pace since 2013. Other than the FTSE, all other European gauges are ticking red, indicating that it will take more than today’s signature for the effects of the Sino-US rapprochement to be felt.

Property firms higher on earnings

Earnings from home builder Persimmon painted a familiar picture of the UK housing market, showing a year-on-year decline in revenues and lower forward sales for 2020. Yet Persimmon’s shares and shares in Barratt Development notched higher - despite the numbers - because recent housing data showed that mortgage approvals and house price figures increased slightly after the December election. Whether this improvement is sustainable or just a brief relief after long months of uncertainty remains to be seen, particularly once Brexit becomes reality.

More rate cut hints from the BoE

The balance on the Bank of England’s Monetary Policy Committee is decidedly shifting towards a rate cut before the end of this month with rate setter Michael Saunders being the latest member to say that borrowing costs should be cut because of weakness in Britain’s labour market. An unexpected dip in UK inflation to a three-month low in December will only further push the Bank in that direction. The currency market is clearly gearing itself towards a rate cut scenario as sterling is losing ground against both the dollar and the euro.

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