By Lorcan Roche Kelly
President Donald Trump signed off on a phase-one trade deal with China, a move that averts the introduction of further tariffs on the Asian nation that were due to come into effect on Sunday. While the terms of the deal have been agreed, the legal text has not yet been formalized, according to people familiar with the matter. There has been no official confirmation from the White House that a deal has been done either, while Chinese media suggest there still may be more work to do.
British Prime Minister Boris Johnson won a resounding majority in yesterday’s election, with his Conservative party gaining 47 seats to 364, while the main opposition Labour party lost 59 in the 650-seat parliament. Market reaction to the result has been very positive, with the pound jumping and the FTSE 250 Index climbing to a record. Among the biggest winners are U.K. utilities, with the heavy Labour defeat removing the risk of nationalizations in the sector. Jeremy Corbyn announced he will stand down as leader of the Labour opposition.
The Federal Reserve Bank of New York is ready to fight any year-end liquidity risks as concerns continue about funding in the repo market. The bank said it will conduct additional repurchase agreements which would take its liquidity support for the market to over half a trillion dollars through year-end. Chairman Jerome Powell said on Wednesday that the Fed would be willing to extend its reserve management beyond the current Treasury bill purchases, if the need arose.
The trade deal and the U.K. election results have given a boost to stocks around the world. Overnight, the MSCI Asia Pacific Index gained 1.5% while Japan’s Topix index closed up 1.6% to reach its highest level since October 2018. In Europe, the Stoxx 600 Index had risen 1.8% by 5:45 a.m. Eastern Time, surpassing its record closing level. S&P 500 futures pointed to a strong start to the trading day, the 10-year Treasury yield was at 1.892% and gold was steady.
Headline November retail sales for the U.S. are expected to show a 0.5% rise when the data is released at 8:30 a.m. The import and export price index for November are also released at that time. New York Fed President John Williams is due to speak at an event later in the day. In Washington, the House Judiciary Committee is set for a final vote on articles of impeachment against Donald Trump when they reconvene at 10:00 a.m. this morning.