European stock markets have started the week on the front foot, buoyed by the positive close on Wall Street Friday but the optimism may be short-lived.
The uplifting mood on Friday was stoked by President Trump’s encouraging comments about China and the ongoing trade dispute between the two countries. But the good mood dissipated over the weekend when China’s President Xi Jinping and the US Vice President Mike Pence went head to head at the Asia Pacific summit this weekend over several issues including China’s One Belt One Road expansion policy and the role of the World Trade Organisation. The spat does not bode well for the meeting in Argentina later this month between President Trump and his Chinese counterpart and will weigh on the markets in the US and Asia between now and then.
Pound higher after last week’s Brexit drama
In London, airlines, metal companies, and Melrose Industries are boosting the FTSE this morning while relatively low oil prices are also playing their role. Crude oil has risen almost 1% overnight but from a relatively low base after it had been battered over the last two weeks; even with the increase it is much cheaper than in September and October.
The pound has regained some ground to trade up 0.26% against the dollar and 0.27% higher against the euro, mostly because the Brexit headlines have calmed down from the high pitch of hysteria last week when Theresa May presented her draft deal to an unwelcoming Parliament. The weekend papers were yet again full of stories of a building threat to her leadership but for the time being the PM is still standing and pushing ahead with the current draft Brexit proposal. The EU is also playing its part toward a divorce with Britain; European ministers are meeting Monday to discuss the proposal on the table, which will have to be ratified by both sides later this month and in December.
The dollar was somewhat rattled by comments from a Fed member over slowing global growth, which stoked concerns over future US interest rate hikes. The dollar index notched down almost 0.1% after declining 0.48% late last week.