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Good morning. Boris Johnson’s Conservatives scored a big parliamentary majority in the U.K., the pound is rallying and the U.S. and China seem to have a trade deal. Here’s what’s moving markets.
After years of political turmoil in the U.K., investors now have some clarity: Boris Johnson won a decisive victory over Jeremy Corbyn’s Labour Party in the general election, clearing the way for the Tory leader to take Britain out of the European Union at the end of next month. What shape, exactly, Brexit will take is still to be defined. Once Britain leaves, Johnson will first need to strike a trade deal with the EU by the end of 2020, and if he wants access to the bloc’s single market, he will have to give up control in some areas, which is anathema to hard-liners in his party. But we get ahead of ourselves. For now...
….currency traders are cheering the end to the Brexit deadlock. The pound jumped by the most against the dollar since 2017, as speculators bet that Johnson’s parliamentary majority would bring an end to the gridlock that held back investment and contributed to an economic slowdown. The currency’s gain is likely to weigh on shares of the big, dollar-earning multinational companies that dominate the FTSE 100 Index. Futures contracts on the index did indeed dip after results came out, though they’ve erased those losses this morning. U.K. government bonds may come under pressure at the open as uncertainty lifts, curbing demand for havens. But how long before the market turns its attention to Scotland?
As usual, it started with a tweet. European stocks jumped late Thursday when Donald Trump signaled the U.S. was close to a phase-one trade deal with China. And sure enough, people familiar with the matter tell Bloomberg News that the U.S. president has signed off on the agreement. That will avert the introduction, scheduled for Sunday, of a new wave of U.S. tariffs on about $160 billion of Chinese consumer goods. Global stocks hit a record high and bond yields climbed on optimism over trade, so look for trade-sensitive stocks to rally in Europe today.
Keep half an eye on Washington late in the European trading day. That’s when the Judiciary Committee in the House of Representatives is likely to approve articles of impeachment against Trump, setting up a vote by the full House next week. It’s all going down on purely partisan lines, with Democrats arguing that Trump abused his power by seeking help from a foreign government in his re-election campaign and Republicans arguing he did no wrong. The committee put the vote off to today after hours of bitter and heated debate. If approved by the Democratic-controlled House, the matter will go to a trial in the Republican-controlled Senate early next year. So no, Trump isn’t likely to be convicted, but all this is likely to feed investor concerns about the state of American democracy.
As noted, markets are finishing the week in a bit of euphoria over trade, the economy and Brexit. It started last Friday, with a blowout U.S. jobs report that beat all expectations, helping to dissipate worries about a global recession. The result should be broad gains in European stocks, with little in the way of earnings news or data to spoil the fun. Among the few items on the calendar: Russia’s central bank makes its last monetary-policy decision of the year, with most economists betting on a quarter-point reduction in the key interest rate, to 6.25%.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
- Two Texas billionaires think they can fix philanthropy.
- In Europe’s richest petro-state, the top oil lobbyist is worried.
- After taking on coal and oil, climate investors target meat next.
- How much do banks earn for the world’s biggest IPO? You might be surprised.
- Delivery Hero to buy South Korea’s Woowa at $4 billion valuation.
- Beijing has built thousands of cheap apartments no one wants .
- The London radio station that’s captured the political zeitgeist.
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