Indices recover on report of tariff delay; UK GE poll in focus

Summary:

• Stocks bounce strongly after tariff reports

• DE30 bounces off 12900 after solid ZEW data

• Technical alert: Gold

• UK data takes a backseat to key election poll

• 4 BIG market movers - are you prepared? 

The reaction in stock indices to some trade news this afternoon has once more revealed the heightened level of sensitivity that the market shave on this front at present, with US indices spiking higher on a positive headline. The Wall Street Journal have published an article which claims that  “ U.S. and Chinese trade negotiators are laying the groundwork for a delay of a fresh round of tariffs set to kick in on Dec. 15, according to officials on both sides,” and this appears to be behind the move.

US futures and European benchmarks were trading in the red before the news came out, although the DE30 had already got some relief after the release of ZEW data for December. Current conditions subindex jumped from -24.7 pts to -19.9 pts (expected -22.3 pts) while expectations gauged moved from -2.1 pts to 10.7 pts (expected 0.5 pts). ZEW institute noted that improvement came as more stable labour market and foreign trade surplus raised hopes for exports and private consumption will develop better than previously expected.

The recovery in equities also put a cap on the price of Gold which struggles at $1467.7 resistance level today. According to the Overbalance methodology, as long as the price sits below the aforementioned level, continuation of a downtrend looks more probable. Should the price resume downward move, the support at $1459 could come into play.

The latest batch of economic data from the UK provides a fairly negative view on the recent levels of activity with the main takeaway being a flat GDP reading for the month of October. After two consecutive monthly contractions a reading of 0.0% does signal some improvement, but this should hardly be celebrated and it’s becoming abundantly clear that economic growth has essentially ground to a halt.

Given the proximity to polling day, the latest round of data has taken a backseat in terms of market impact, with a fairly muted reaction. The main event of the day for the pound will likely come this evening at 10PM with the release of the eagerly anticipated MRP poll from YouGov. This survey gained credence as the pre-eminent poll after correctly calling a hung parliament in 2017 when nearly all other polls pointed to a Conservative majority. This will be the second reading on the forthcoming election from this source, with the first take forecasting a 68 seat majority for the Tories. 

The UK election and December 15th tariff deadline are 2 of 4 potentially major events this week and you can read our primer on all of these here.