Week in Review 10.11.2019

Stocks snapped their three-week losing streak to end higher, thanks to positive developments in trade talks between the U.S. and China, and improved optimism surrounding Brexit negotiations.On Friday, the U.S. and China announced that they had agreed in principle to a partial trade deal. Dubbed “Phase One” by President Trump, the deal will see China buy $40-50B of U.S. agricultural products over the next two years, better protect intellectual property rights, and allow greater access to foreign financial companies. In exchange, the U.S. will not raise tariffs from 25% to 30% on $250B of Chinese goods starting October 15. Specific details still need to be worked out, but the deal is expected to be finalized within four to five weeks. Unaddressed in the current deal were some of the thornier issues including China’s practice of technology theft and predatory regulation of U.S. companies.

News that U.K. PM Boris Johnson and his Irish counterpart held Brexit talks on Friday described as “very promising” led European stocks to record their best day since January. While the actual breakthrough was harder to discern, financial markets welcomed the fact that both leaders felt the meeting was constructive. Over the weekend, the UK and EU held further negotiations in advance of a summit to be held later this week. Despite some progress, both sides said that a significant amount of work remains to be done to secure a deal. Johnson is particularly eager to secure a deal before the end of the week so as to avoid having to ask the EU for an extension, something he is loathe to do.