Trade Talk Lifts Global Indices Into the Weekend

Trade chatter continued to dictate sentiment on Friday. European markets charged higher and Wall Street opened on a positive footing, following reports that US and China had reached a consensus in principle on key topics in the trade negotiations. The promise of further talks next week has ignited optimism in the markets as the world’s two largest economies scramble to reach a deal before the March deadline.

Miners & banks rally
Miners helped lead the FTSE northwards as they traced metal prices higher. RBS was also a standout performer as it proved to investors it was on the right track with impressive results and a significantly larger than expected dividend payment. However, the bank did also warn that Brexit could mean it misses some of its longer-term targets. RBS was up just shy of 2% moving towards the close.

Pound steady in battle of UK retail sales vs Brexit jitters
The pound finally moved higher on Friday afternoon as Brexit jitters battled with stronger than forecast UK retail sales for traders’ attention. Signs that the UK consumer continued to spend in January have offered some support to the Brexit battered pound. Retail sales volumes jumped by nearly 1% in January after their biggest fall in 18 months in December. These are encouraging numbers, showing that consumer spending remains strong. However, they come on the back of heavy discounting, meaning the bigger picture is still one of caution.

Retail sales provided some distraction from the chaos of Brexit. After another humiliating defeat for Theresa May in Parliament yesterday, she has vowed to push on with efforts to secure a revised Brexit deal regardless. Whilst the latest government defeat has no legal force, Theresa May risks angering ministers further. The pound has rebounded off 4-week lows reached in the previous session as requesting an extension to Article 50 looks to be the only viable option remaining. The pound is currently finding support in the region of $1.2820, although this is more to do with dollar weakness than a burst of pound strength.

US industrial production adds to markets slowdown fears
Data showing that US industrial production unexpectedly declined -0.6%, instead of gaining by 0.1% sent the dollar sharply lower. The weak data comes following dismal retail sales data released in the previous session and once again feeds directly into fears over slowing global growth. This is the first fall in industrial production for 8 months which will undoubtedly unnerve some investors.

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