Trade Deal & Election Resolutions

Global equities benchmarks have seen some significant developments in key themes over the course of recent trading, reflected in the current price action we are seeing.

On Friday, the US announced that it has now confirmed the phase-one trade deal with China. The deal has been the source of much trader speculation since it was first announced in October and finally, investors have been rewarded for their patience. The deal broadly comprises an agreement between the two countries for China to increase its purchase of US agricultural products (along with other goods) and for the US to begin reducing and removing tariffs. The deal also includes a commitment to push talks along onto discussing a second trade deal. The market has been firmly encouraged by the prospect of seeing the trade war finally put to bed and indices around the globe have been trading higher.

In the UK and Europe, news of the UK conservative party winning the general elections there has improved expectations for the outcome of Brexit. The UK is now highly likely to leave the EU on January 31st next year as dictated by the terms of PM Johnson’s Brexit deal. This will see negotiations between the EU and the UK move into a transitional phase, due to end in December next year, centred around establishing the terms of future trade. The news has been positive for both European and UK investors and is seeing assets markets trading higher.

The outlook for UK assets in particular is increasingly bullish in light of further data weakness this week, (UK manufacturing & services PMIs both lower than expected) which has increased expectations of potential BOE easing in the coming months. The BOE meeting on Thursday is expected to see the bank hold rates steady, though forward guidance might take a dovish tone.

Technical & Trade Views

DAX (Bullish, above 13155.27)

From a technical and trading perspective. DAX continued higher and has now broke above the monthly pivot at 13155.27. With longer-term VWAP still positive a further move higher is likely with momentum studies also showing plenty of scope for a continuation higher.

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S&P500 (Bullish, above 3109.25 )

S&P500 From a technical and trade perspective. Price broke out to new record highs this week and while above the monthly pivot at 3109.25, continued upside is likely. With longer-term VWAP positive and plenty of volume seen on the lows, the bias remains for further gains.

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FTSE (Bullish, above 7338.6)

FTSE From a technical and trading perspective. The reversal higher in the FTSE came ahead of the yearly pivot at 7060.9 taking price back above the monthly pivot at 7338.6. With longer-term VWAP positive again a further break higher is likely, with a move above the yearly R1 at 7579.3 the key objective.

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Nikkei (Bullish, above 23242.1)

From a technical and trade perspective. Price continues to trade higher above the yearly R1 at 23333, in line with prior projections. With longer-term VWAP positive, a continued break higher seems likely, with price holding above the monthly pivot at 23242.1.

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