Stock markets rose yesterday, boosted once more by hopes of a China-US trade deal, with some looking to December for an accord between the two economic superpowers.
The pound slipped, meanwhile, on talk that a Bank of England rate cut could be in the pipeline after the central bank downgraded its growth outlook.
Bank chiefs meeting this week nonetheless left its main rate unchanged for now.
London equities closed only a touch higher, but equity markets elsewhere rose more solidly, along with oil prices, after China said the two sides have agreed a plan to remove tariffs imposed on goods in stages if a preliminary “phase one” agreement announced last month is finalized.
However, the White House did not publicly comment on the claim and gains moderated following a Reuters report that described opposition to rolling back tariffs within the White House.
Central bank refrains from any change in policy
The pullback revealed continued doubt about a US-China trade agreement despite more conciliatory signs from both sides, said Karl Haeling of LBBW.
“Until this thing is nailed down, there is still a lingering concern that it could fall apart,” Haeling said. “You’re one tweet away, so to speak.”
Still, both the Dow and S&P 500 mustered fresh records.
Meanwhile, the Bank of England’s rate decision, which was not unanimous, sparked speculation that easier rates are coming, analysts said.
“Two members preferred a 25 basis point cut in bank rate at this meeting,” the bank’s statement said. The pair judged that “some extra stimulus was needed.”
The central bank also upgraded its British growth forecast to 1.4 per cent in 2019 but downgraded 2020 guidance to 1.2 per cent.
“Given the political uncertainty ahead of next month’s election it is not at all surprising that the central bank has decided to refrain from any change in policy, but the calls from some members for rate cuts come as something of a surprise and have caused an adverse reaction in the pound,” said David Cheetham at XTB.
This week, the Conservative government cancelled a planned release of its own updated economic forecasts just one hour before publication had been due.
“This will no longer go ahead as the Cabinet secretary has concluded that this would not be consistent with the Cabinet Office’s general election guidance,” the Office for Budget Responsibility said in a statement.
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