Via the excellent Damien Boey at Credit Suisse:
Overnight, investors were buoyed by hopes of a trade deal, and apparent progress in Brexit negotiations:
- A possible narrow US-China trade deal: US President Trump suggested that talks with Chinese Vice Premier He were going well and that talks would not end prematurely as previously speculated. The US-China Business Council also suggested that a deal is coming, albeit on a smaller scale than some people had hoped. It appears that a limited deal will stop a planned tariff increase on 15 October, and repackage concessions that China has made to the US previously (including an agreement on currency). It could also involve partially lifting a ban on US sales to Chinese tech company Huawei.
- Brexit progress: British Prime Minister (PM) Johnson and his Irish counterpart Varadkar agreed that they could see a pathway to a possible deal by the end of October, with other European Union officials previously suggesting that they would go along with a British Brexit proposal if Ireland approved.
In response to these headlines, bond yields surged higher, while the USD weakened, especially against the GBP. Equities rose a little too, with value outperforming momentum and defensive factors.
