- Trade and government shutdown hopes lift the mood
- Equities recover from last week’s downside
- UK stocks show ‘no deal’ jitters predominate
Yet again investors are dependent on utterances from the US president for clues as to whether this session’s risk-on sentiment will last more than a few hours. Already he has hinted at a move towards conciliation rather than conflict with China on trade, and now the survival of a putative deal to end the government shutdown depends on how the White House views it. While it doesn’t entirely ‘build the wall’, it does make a start, and the White House is unlikely to seek to plunge hundreds of thousands of US employees into another shutdown that will see their paycheques come to a stop. Looking at the longer-term view, the recovery in risk assets over the past few days has shown that those who
fled markets during the short drop at the end of last week were probably overly-cautious. Yes, markets have surged since December, but the macro backdrop for the US is encouraging, and with fund managers apparently heavily overweight cash once again there appears to be plenty of fuel for more gains, at least over the longer-term.
UK-focused stocks have taken a knock this afternoon as Brexit fears resurface. Reports of the PM heading towards a ‘no deal’ have been sufficient to spook investors, and TUI’s warning about weakness comes at a time when markets are already worried about the resilience of the UK economy. ‘Holding our nerve’ appears to be the new approach to get a deal, but a great game of chicken seems to be an unpromising way to conduct global affairs.