Stocks rally as US/China deal seems close

Sterling falls ahead of UK election result

Blue-chip stocks rose sharply on Thursday, buoyed by an expectation that the United States and China may reach a preliminary agreement on trade before another round of tariffs kicks in.

On the currency markets, the pound weakened ahead of the results of the UK general election and the oil price bounced following an upbeat assessment of 2020 demand.

The S&P 500 was last up around 0.6 percent, having hit a new record high in early Wall Street trading, after U.S. President Donald Trump tweeted that Washington was “very close” to a deal with China.

The Wall Street Journal reported earlier that U.S. negotiators have offered to slash existing tariffs by as much as half on roughly $360bn (£472bn, €423bn) of Chinese-made goods as well as to cancel a new round of duties that are due to come into effect this Sunday, according to people briefed on the matter.

In Europe, the FTSE 100 closed up 0.8 percent at 7,273.47 points, while the Stoxx 50 index of the region’s biggest companies, closed up 0.5 percent on the day at 3,706.35 points, led by the banking sector and Spanish clothing retailer Inditex, which on Wednesday reported a leap in profits. The pound fell against the dollar and the euro, as British voters went to the polls in a General Election that is expected to determine the course of the UK’s departure from the European Union.

Sterling rallied to near three-year highs against the euro earlier this week and to its highest against the dollar since March this year, meaning that there could well be scope for further declines once the result of the vote is released.

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“Sterling's surge in the past fortnight reflects expectations for a small win for the ruling party. If this scenario turns into reality, the pound may marginally extend its gains but also fall on a "buy the rumor, sell the fact" scenario. A landslide victory is needed to extend GBP/USD's advance,” said GKFX analyst David Morrison.

The pound was last down 0.5 percent on the day against the dollar at $1.3131, while against the euro, sterling was down 0.4 percent at 84.64 pence, having retreated from a 31-month high this week above 84.75 pence. On the commodities market, crude oil futures rose by 1.1 percent on the day to $64.44 a barrel, following the International Energy Agency’s monthly market report that suggested supply will not outstrip consumption by quite as much as initially expected next year.

The IEA, which advises western governments on energy policy, said that a decision by the Organization of the Petroleum Exporting Countries, and several of its partners, including Russia and Oman, to cut oil production by another 500,000 barrels per day next year, may help tighten up the balance between global supply and demand next year.

“In this report we have reduced our forecast for non-OPEC production growth next year from 2.3 mb/d to 2.1 mb/d to take account of lower output from participants in the OPEC+ deal and a weaker growth outlook for Brazil, Ghana and the United States,” the IEA said. The agency expects demand to grow at 1.1 million bpd this year and 1.2 million bpd next year.

With the pickup in investor risk appetite, some of the bigger cryptocurrencies reversed their earlier losses. Bitcoin was last up around 0.1 percent at $7,219, having fallen by as much as 2 percent earlier in the day, while Ethereum rallied by 0.8 percent to $144.60, from a session low of $140.

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