➤ Pound firms as U.K.'s May wins confidence vote.
➤ Asian shares rise amid trade optimism; European equities muted.
➤ Italian bond yields slip after trimmed budget deficit target.
➤ Oil slips amid continued oversupply fears.
Sterling firmed against the dollar after U.K. Prime Minister Theresa May won a party leadership challenge, while global stocks extended gains on further signs of easing trade tensions between the U.S. and China.
The pound was up 0.19% against the dollar as of 6:30 a.m. ET following a confidence vote against May, who won the support of enough Conservative lawmakers last night to allow her to remain party leader for another year unchallenged. May now heads to Brussels to meet EU officials in a bid to renegotiate her Brexit deal, which still faces strong opposition in parliament.
"We see any potential [pound] gains from here as temporary as the fundamental picture has not change much after the vote. [Prime Minister] May still has to put her withdrawal agreement to parliament — which is very likely to be rejected," according to ING strategists.
"[T]he defeat of the [prime minister's] opponents does suggest that the risks of "no deal" Brexit may well have receded somewhat, with the next focus likely to be in an extension of Article 50, a so called people's vote, or no Brexit at all," said Michael Hewson, chief market analyst at CMC Markets UK.
The euro was up 0.10% against the dollar ahead of a European Central Bank decision, with policymakers expected to keep rates unchanged and formally announce the end to the central bank's quantitative easing program.
Elsewhere, the Swiss franc gained 0.18% versus the dollar, while the Turkish lira ticked down 0.04% as the Schweizerische Nationalbank and Türkiye Cumhuriyet Merkez Bankası AS kept their respective rates on hold, as expected.
The Japanese yen slipped 0.12% against the dollar, while the Chinese yuan was broadly stable on the back of renewed optimism that the U.S. and China are moving closer to a trade deal.
Chinese importers reportedly made their first major purchase of more than 1.5 million metric tonnes of U.S. soybeans since the two countries struck a 90-day trade truce earlier this month. Separately, Beijing is reportedly drafting a replacement to its "Made in China 2025" strategy that aimed for Chinese dominance in high-tech industries, a policy that has been criticized by Washington.
Asian bourses closed higher, with Japan's Nikkei 225 index up 0.99%, Hong Kong's Hang Seng Index rising 1.29% and the Shanghai SE composite index up 1.23%. European markets were mixed, with Germany's DAX index rising 0.19%, France's CAC 40 broadly unchanged and the FTSE 100 shedding 0.09%.
Italy's FTSE MIB stock index gained 0.73% and yields on 10-year government bonds dropped 12 basis points to 2.89% after the government agreed to cut its 2019 budget deficit target to 2.04% of GDP from a previous estimate of 2.4%, in a bid to dodge EU sanctions. Yields on 10-year U.S. Treasurys fell nearly 2 basis points to 2.90%.
In commodities, Brent crude oil was down 0.43% to $59.89 per barrel on the ICE Futures Exchange. The International Energy Agency hinted that there could still be a significant oil surplus next year despite pledges from the Organization of the Petroleum Exporting Countries and its allies to cut production.
Earlier, OPEC reiterated expectations that demand for crude will ease through next year.
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Market capitalization of top mining companies falls nearly 11% on monthly basis
The day ahead:
8:30 a.m. ET – U.S. jobless claims (Econoday consensus: 228,000)
8:30 a.m. ET – U.S. import and export prices (Econoday consensus: import -1.0% month over month, export 0.1% month over month)
10:30 a.m. ET – EIA natural gas report
2 p.m. ET – Treasury budget (Econoday consensus: $-165.0 billion)
4:30 p.m. ET – Fed balance sheet
4:30 p.m. ET – U.S. money supply