Global Markets, US Futures Surge On Renewed Trade Hopes

The vote of no-confidence will be held between 18.00GMT and 20.00GMT tonight, with results are to be announced at 21.00GMT. UK PM May said a new leader would have to extend or rescind Article 50, while adding she believes a deal with EU is attainable and within UK’s grasp after meeting with EU leaders yesterday. Chairman of the 1922 committee Brady says that if a leadership contest were to occur, they would want to finish the parliamentary stage before Christmas. Meanwhile, ITV's Peston tweeted that MP George Freeman appears to be saying that PM May is over, but that Tories have to find a way to replace her temporarily without a leadership election. Elsewhere, UK Shadow Brexit Minister Starmer said the opposition Labour party will call a no-confidence vote “before Christmas”.

“The market is concerned that May could be replaced by a Brexit-supporter, increasing the chance of a no-deal scenario,” said Rodrigo Catril, a senior FX strategist at NAB.

The dollar weakened versus most of its G-10 peers, as the yen slipped as demand for havens waned on signs the U.S.-China trade dispute may be easing. The recent slide in U.S. yields means that the prospect for “broad-based” yen appreciation appears to be increasing every day, Morgan Stanley strategists wrote in a note. The Aussie rose a second day as the offshore yuan climbed with Asian and European equities and U.S. stock futures.

Investors are also looking ahead to the U.S CPI later on Wednesday where an expected slowdown in headline inflation would only reinforce speculation of fewer rate hikes from the Federal Reserve.

Meanwhile, in France, the spread between government bond yields and those in Germany were about the highest since the 2017 election. France’s Prime Minister Edouard Philippe confirmed that President Emmanuel Macron’s efforts to meet protester demands will have an impact on the country’s deficit, with the situation causing a new headache for the EU in its talks over the Italian budget.

Elsewhere, oil jumped on the easing trade war rhetoric and after the API oil report signaled a far greater than expected, 10 million draw in crude inventories. Treasuries edged lower after Trump warned the Federal Reserve against hiking interest rates this month. India’s bonds rallied after an ally of Prime Minister Narendra Modi was named as the new central bank chief. In terms of metals, spot gold (+0.1%) remains steady as the dollar index remains within a tight range while copper traded sideways near weekly highs in light of the improvement in risk sentiment. Elsewhere, Shanghai steel snapped a three-day losing streak amid talks of production cuts at the top steelmaking city, Tangshan.

Expected data include mortgage applications and inflation. Nordson is reporting earnings

Market Snapshot

  • S&P 500 futures up 0.8% to 2,662.00
  • STOXX Europe 600 up 0.9% to 347.15
  • MXAP up 1.5% to 150.16
  • MXAPJ up 1.3% to 483.90
  • Nikkei up 2.2% to 21,602.75
  • Topix up 2% to 1,606.61
  • Hang Seng Index up 1.6% to 26,186.71
  • Shanghai Composite up 0.3% to 2,602.15
  • Sensex up 1.8% to 35,769.11
  • Australia S&P/ASX 200 up 1.4% to 5,653.50
  • Kospi up 1.4% to 2,082.57
  • German 10Y yield rose 0.9 bps to 0.241%
  • Euro up 0.1% to $1.1329
  • Italian 10Y yield rose 1.6 bps to 2.756%
  • Spanish 10Y yield fell 1.3 bps to 1.424%
  • Brent futures up 1.7% to $61.22/bbl
  • Gold spot up 0.1% to $1,244.11
  • U.S. Dollar Index unchanged at 97.38

Top Overnight News

  • Theresa May is fighting for her job as British prime minister after being told she will face a vote of no confidence in her leadership, throwing the U.K. into fresh turmoil and Brexit into disarray
  • Progress toward easing the steep tariffs China imposed on U.S. vehicle imports this year lifted carmaker stocks across the globe. President Trump says he’s willing to meet China’s leader Xi again as he hailed the country for resuming soybean purchases
  • President Trump said he would intervene in the case of Huawei CFO Meng if it would help win a trade deal with China
  • The European Commission took a step toward meeting the financial industry’s demands for a so-called equivalence decision that would help prevent a derivatives-market rupture in a no-deal Brexit
  • President Trump tells Reuters it would be a mistake if the Fed increases interest rates when it meets next week, with the flexibility of lower rates needed to support the U.S. economy amid the trade war with China
  • Trump staged a confrontation Tuesday with the two top congressional Democrats before television cameras in the Oval Office as the dispute over funding for his border wall turned publicly acrimonious
  • As Italian Prime Minister Giuseppe Conte prepares to present his budget in Brussels on Wednesday, one of the main powers behind Italy’s government, League leader Matteo Salvini, may be looking beyond the crisis a failed spending plan could trigger and toward new elections early next year, la Repubblica reported; Salvini said the report on early elections was fake news, according to newswire Ansa
  • France’s government will face a no-confidence vote in parliament Thursday, according to AFP
  • Sovereign bonds and stocks rallied in India on optimism of a more dovish monetary policy after the government named former bureaucrat Shaktikanta Das as the central bank chief. The rupee weakened amid investor concerns about central bank independence.
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