Stock markets rose yesterday, boosted once more by hopes of a China-US trade deal, with some looking to December for an accord between the two economic superpowers.
The pound slipped meanwhile on talk that a Bank of England rate cut could be in the pipeline after the central bank downgraded its growth outlook.
Bank chiefs meeting Thursday nonetheless left its main rate unchanged for now.
London equities closed only a touch higher, but equity markets elsewhere rose more solidly, along with oil prices, after China said it had agreed with the US on a plan to gradually remove each other’s tariffs, fuelling hopes they can resolve a trade war that has roiled the global economy.
London’s FTSE 100 rose 0.1% to close at 7,406.41 points; Frankfurt’s DAX 30 was up 0.8% at 13,289.46, while Paris’ CAC 40 was up 0.4% at 5,890.99.
Broad optimism that the US and China would soon complete part one of a wider agreement has been the basis of a rally in global equities for several weeks.
“What trade promise fatigue?”, asked Edward Moya, an analyst with Oanda.
“Financial markets remain determined to climb higher as global equities were boosted after China’s Commerce Ministry spokesman Gao Feng noted that both sides had agreed to simultaneously cancel some existing tariffs on one another’s goods,” he said.
Eurozone stocks were well in the black at the close, as was Wall Street in the late New York morning, helped by US weekly jobless claims coming in lower than expected.
The new appetite for risk, favouring stocks, weighed on the bond market however.
As a result, the yield on the French 10-year government bond which had gone negative in June, returned into positive territory yesterday.
The Bank of England’s rate decision, which was not unanimous, sparked speculation that easier rates are coming, analysts said.
“Two members preferred a 25 basis point cut in bank rate at this meeting,” the bank’s statement said.
The pair judged that “some extra stimulus was needed”.
The central bank also upgraded its UK growth forecast to 1.4% in 2019 but downgraded 2020 guidance to 1.2%.
“Given the political uncertainty ahead of next month’s election it is not at all surprising that the central bank has decided to refrain from any change in policy, but the calls from some members for rate cuts come as something of a surprise and have caused an adverse reaction in the pound,” said David Cheetham at xtb.
Earlier yesterday, the Conservative government cancelled a planned release of its own updated economic forecasts just one hour before publication had been due.
“This will no longer go ahead as the Cabinet Secretary has concluded that this would not be consistent with the Cabinet Office’s general election guidance,” the Office for Budget Responsibility said in a statement.
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