Stocks Swell on USTR, Pence Speech

US stock indices are nearing record highs on a combination of bullish remarks from the US Trade Representative regarding the progress of US-China talks and increased expectations the Fed will cut rates next Wednesday. Don't forget Thursday's speech from US VP Pence toning down the China economic rhetoric also helped sentimentm -- in a true sign that the US wants a deal. Gold and silver extended their gains as the Fed doubled up on its daily repo operations, while NZD is the weakest currency of the day. Both GBP and EUR are lower after the EU deferred its decision on Brexit extension to next week (more on this below). A new Premium Trade was issued yesterday evening, now in the green. And dont forget to adjust your European clocks this Sunday ahead of a big trading week. London is now equal to GMT & 4 hours ahead of New York during all of next week, until US/Canada turn back their clocks on Nov 3rd and London reverts to the usual 5 hrs ahead of NY.  

فيديو المشتركين الآن جاهز تفسير صفقة أمس و آخر تطورات بركزيت

Just over a year ago, Pence set the stage for an escalating trade war with a fiery speech that took Chinese officials aback. The sequel on Thursday continued themes criticizing human rights but the economic rhetoric was less aggressive. Pence said Trump was not looking to decouple from China and that if China ends unfair trade, the US is ready for a new future.

This was combined with news that China had strengthened laws on technology transfers and intellectual property, along with committing to $20B in agricultural purchases in phase one of the deal. The words and actions show tentative signs of sincerity and are a genuine reason for optimism.

Adding Elections to the Mess

In the UK, optimism about a near-term Brexit deal is fading fast. Conservatives will attempt to call an election on Monday. That initial move will probably be defeated but reports suggest the government will go 'on strike' and pull the planned budget in a continued effort to force an election. This is a surprise given how close they appeared to getting a Brexit deal but – as we warned – Boris Johnson is riding high in the polls and is attempting to push his advantage. Labour has consistently said they will support an election once Brexit is extended but there are signs the party is divided.

The base case on an election is that Conservatives win a larger majority and then pass the Brexit deal. The solid position should also help them to stimulate the economy and negotiate the future relationship with the EU. But elections are inherently unpredictable. Theresa May thought the same thing when she called an early election and that ended in disaster. Voters are less predictable than ever and the nightmare scenario is that we're left with an even-more divided and paralyzed parliament. That's a recipe for a pullback in the pound. Of course, with the EU still undecided about the extension timeline, the trade is extremely fluid and headlines will continue to dominate. The 2-month downfall in EURGBP is finding suppport at its 200-WEEK MA, touching it for the first time the 2016 referendum.