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Stocks cheer Brexit deal; pound reverses gains as deal fate uncertain


According to Market Intelligence, December 2022


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Stocks cheer Brexit deal; pound reverses gains as deal fate uncertain

US equities, European stocks rise following Brexit deal.

➤ China, US working on phase one of trade deal.

Dollar, Treasurys retreat.

➤ Australia dollar gains 1% as unemployment rate falls.

U.S. and European stocks cheered the Brexit deal announcement, though uncertainty about whether the deal will be ratified by U.K. Parliament reversed gains for the pound, which hit its highest level since May earlier in the day.

The S&P 500 gained 0.5% around 9:30 a.m. ET. The FTSE 100 rose 0.8% and Germany's DAX gained 0.4%, while France's CAC 40 was little changed.

EU Commission President Jean-Claude Juncker and British Prime Minister Boris Johnson announced a Brexit deal, paving the way for a vote in U.K. Parliament this weekend.

But continued opposition from Northern Ireland's Democratic Unionist Party, which props up Johnson's minority government and earlier in the day refused to back customs and consent proposals, raised uncertainty over Parliament's approval.

In the U.S., Morgan Stanley reported higher investment banking and sales and trading revenues for the third quarter, compared to the same quarter of 2018. Philip Morris International Inc. revised its 2019 full-year EPS forecast

Following the release of disappointing retail sales data, the latest Beige Book showed the U.S. economy grew at a "slight to modest pace" in recent weeks, though the manufacturing downturn continued. The data sets came as Fed officials weighed whether they should cut interest rates at their next meeting, scheduled for Oct. 29-30.

On the trade front, Beijing said it hopes to reach a partial trade agreement with Washington as soon as possible, following confirmation from U.S. Treasury Secretary Steven Mnuchin that the two sides were working on phase one of the deal.

Asian exchanges were largely down as Hong Kong's Hang Seng advanced 0.7% while Japan's Nikkei 225 and the Shanghai SE Composite slipped 0.1% each. In its latest projection, S&P Global Ratings maintained its growth forecast for China for 2019 but lowered its estimate for 2020.

Sterling reversed gains to trade unchanged at about $1.2826, having topped $1.29 earlier on the Brexit deal news.

Elsewhere, the Australian dollar appreciated 1% against its U.S. counterpart as data showed the unemployment rate ticked down to 5.2% in September from 5.3% in the prior month.

The dollar index declined 0.3%. The Japanese yen rose 0.1% against the U.S. currency and the euro rose 0.5%.

In bond markets, U.K. bonds gained, with yields on 10-year Gilts falling 1 basis point to 0.699%. Gilts had sold off after Brexit deal news. Ten-year Treasury yields added 1 basis point to 1.756%. Yields on German bunds with the same maturity slipped 1 basis point to negative 0.389%.

In commodities, Brent crude lost 0.6% to $59.04 per barrel on the ICE Futures Exchange. Gold reversed gains to trade nearly flat.

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The day ahead:

10:30 a.m. ET – U.S. EIA Natural Gas Report

11 a.m. ET – U.S. EIA Petroleum Status Report

2 p.m. ET – U.S. Fed's Michelle Bowman speaks

2 p.m. ET – U.S. Fed's Charles Evans speaks

4:20 p.m. ET – U.S Fed's John Williams speaks

4:30 p.m. ET – U.S. Fed Balance Sheet and Money Supply

7:30 p.m. ET – Japan CPI (Econoday consensus: 0.3% annual)

10 p.m. ET – China GDP (Econoday consensus: 6.1% annual)

10 p.m. ET – China Industrial Production (Econoday consensus: 5.0% monthly)

10 p.m. ET – China Fixed Asset Investment (Econoday consensus: 5.4% YTD)