LONDON (Reuters) - World stock markets have once again latched on to optimism that the two big deals dominating sentiment all year – the U.S.-China trade war and Brexit – will turn out all right.
Or at least not as bad as many had feared.
Early indications suggest S&P 500 companies might dodge a first annual aggregate profits contraction since 2016, for the third quarter in a row.
Halliburton stock climbed more than 6% after its third quarter update on Monday and the S&P 500 itself gained 0.7%, led by cyclical and trade-sensitive stocks led the way.
Encouraging words from Washington and Beijing on the prospects of some trade truce between the world’s two biggest economies helped, especially White House advisor Larry Kudlow’s comment that progress ahead of next month’s APEC summit could stop fresh U.S. tariff rises on Chinese goods going ahead in December.
UK markets continued to see the latest developments in the Brexit saga as positive on balance – fears the UK will crash out of the European Union at the end of this month are now considered unlikely.
He’s expected to struggle to get that done in time — only nine business days are left before the Halloween deadline, so the EU will probably have to agree to his formal request for another extension.
If Johnson were to lose, that could scupper the deal once again, see a long delay and possible election in the interim.
Sterling continued to hold the bulk of last week’s rally, eking out another 5 1/2-month high just above $1.30 on Monday, then trading just below that level first thing today.
Even though Japanese markets were closed for a holiday overnight, other Asia markets gained overnight.
European and U.S. stock futures were flat.
Benchmark sovereign bond yields continued to rise, with 10-year Treasury yields reaching their highest in almost a month as the yield curve between three months and 10 years moved further back into positive territory.
In emerging markets, attention turned to Lebanese assets after parliament on Monday approved an emergency reform package.
Analysts considered the reforms insufficient to bolster investor confidence, and banks in Lebanon remain closed on Tuesday until calm there is restored.
U.S. President Donald Trump on Monday said a ceasefire between Turkey and U.S.-allied Kurdish-led fighters in northern Syria could possibly go beyond Tuesday’s expiration as U.S. senators keep up their push to impose sanctions on Turkey.
Turkish President Tayyip Erdogan will meet on Tuesday with Russian President Vladimir Putin to discuss the Syria attacks. The lira gained on Tuesday after another sharp drop yesterday.
On the European corporate front, the third-quarter earnings season is accelerating with investors looking for signs that Europe has started to rebound.
Netherlands-based staffing company Randstad reported a better-than-expected drop of 2% in third-quarter core profit, as previously slowing European markets stabilized.
Sensor specialist AMS reported third-quarter sales above its own guidance.
Logitech reported a 4.5% increase in operating income. The German software company Software AG saw a 5% increase in third-quarter revenue.
But in Britain, household goods maker Reckitt Benckiser cut its full-year sales forecast for the second time this yea.
In other disappointing news, France’s Imerys and Norway’s Aker BP cut their outlook.
A look at the day ahead from EMEA markets editor Mike Dolan. The views expressed are his own.
Editing by Larry King