Tuesday 19 November 2019 11:59 am

FTSE 100 rallies on trader optimism over US-China deal

European stock markets rallied this morning as investors reacted well to news from the US-China trade talks.

Britain’s FTSE 100 was 1.21 per cent higher at midday, while the German Dax had risen 1.01 per cent. The pan-European Euronext 100 was 0.27 per cent higher.

Read more: Donald Trump defends China trade war but says a deal ‘close’

Europe’s traders responded more positively to the noises coming from Beijing and Washington than their Asian counterparts.

While China and Hong Kong’s indexes both rose, The Singaporean, Korean and Japanese markets all closed lower.

European investors responded positively to the decision by the US government to let the country’s firms keep doing business with Chinese tech giant Huawei.

China’s central bank also lowered a key short-term interest rate yesterday, signalling that it was loosening monetary policy. Stimulus in China would boost the global economy, traders hope.

“It is almost as if this is still a bull market,” said Chris Beauchamp, chief market analyst at online trading platform IG. “Disturbances in Hong Kong have failed to dent the bullish view, and with trade wars still mercifully quiet the indices appear to have taken the bit between their teeth.”

“European indices are surging in impressive fashion, and even the FTSE 100 is powering higher,” Beauchamp added.

Mark Haefele, chief investment officer at UBS Global Wealth Management, said: “Overall, we think the chance of a complete breakdown in talks is now lower, and the chance of a positive resolution – potentially including a rollback of tariffs – is higher.”

Haefele said US President Donald Trump probably wants to strike a deal before the 2020 presidential elections. “A workable agreement would enable President Trump to ‘declare victory” ahead of the vote,” he said.

Russ Mould, investment director at broker AJ Bell, said: “The seemingly endless question of US-China trade remains the main influence on markets, with mixed messages coming from Washington and Beijing.”

Investors in UK firms will also keep an eye on tonight’s General Election TV debate between Prime Minister Boris Johnson and Labour leader Jeremy Corbyn.

Read more: Cobham’s £4bn takeover set to go through as Andrea Leadsom signals approval

A strong performance by Johnson could boost the pound, as investors think a Conservative majority would pass a Brexit deal and end some of the economic uncertainty. A stronger pound could weigh on the FTSE, however.

Britain’s FTSE 250 was 0.94 per cent higher, boosted by a 3.75 per cent rise in Cobham’s shares after a takeover deal for the aerospace firm was approved.

(Image credit: Getty)