Brexit Breakthrough Hopes Lift Sterling: 5 Things The Global Markets Are Talking About Today

October was the worst month in six years for global equities, and despite a 48-hour reprieve on the final two days of trading as investors balanced portfolios. November begins with regional bourses providing some mixed results.

U.S. Treasury prices were lower despite the ongoing heartache in equity markets pushing the U.S. benchmark yield back above 3.15 percent.

Sterling rallied aggressively overnight ahead of Thursday's Bank of England (BoE) monetary policy decision on reports that Prime Minister Theresa May and EU negotiators have reached a tentative agreement that would give U.K. financial services companies continued access to European markets after Brexit.

Elsewhere, the Chinese yuan has rallied from his decade low, along with commodity currencies (CAD, AUD and NZD) as Chinese leadership signals that further stimulus measures are being planned.

With all this in mind, here are five things the global markets were talking about on Thursday.

1. Global Bourses Post Mixed Results

The Nikkei fell overnight as large-cap mobile phone companies, which make up 80 percent of the index, said lower service fees will start hitting the bottom line in the next fiscal year. The Nikkei share average dropped 1.06 percent.

The Australian benchmark index closed slightly higher overnight as shares in BHP rallied over 6.2 percent on the announcement of $10.4 billion shareholder return. The S&P/ASX 200 index rose 0.18 percent. In South Korea, the Kospi stock index dropped 0.26 percent overnight, snapping two-session gains, as concerns linger over a U.S.-China trade war.

In China, shares moved higher on Thursday after a tough October that saw the country's blue-chip index drop more than 8 percent on news that leaders are to continue to take steps to support domestic markets. The Shanghai Composite index closed up 0.1 percent, while the blue-chip CSI300 index was up 0.75 percent. In Hong Kong, the Hang Seng Index ended the day 1.75 percent higher.

In Europe, regional indices trade mixed with underperformance in the FTSE as Brexit optimism pushes the pound higher, with the BoE rate decision along with the quarterly inflation report in focus.

2. Oil Prices Fall On Signs Of Rising Supply

Oil prices extended their losses overnight, pressured by signs of rising supply and by growing concerns that demand may weaken on the prospect of a global economic slowdown.

Brent crude for January has dropped 0.49 percent to $74.67 per barrel, while West Texas Intermediate (WTI) crude futures have declined 29c to $65.02 a barrel.

Prices are pressured after data this week from the U.S. EIA showed crude inventories last week climbed for a sixth consecutive week.

Also weighing on prices is a Reuters OPEC poll showing that the organization increased oil production in October to its highest in two years, as higher output led by the UAE and Libya more than offset a cut in Iranian shipments due to U.S sanctions, set to begin on November 4.

And finally, growing concerns over the prospect of a global slowdown amid the ongoing U.S.-China trade war are also weighing on prices.

3. Yields Looking For Guidance

Government bond markets in the eurozone have been relatively calm given that month-end flows have now been completed and it is a holiday in parts of Europe (France & Italy) and one day before U.S. payrolls. Nevertheless, some upbeat noises on Brexit are trying to dim the appeal of fixed income assets.

The yield on U.S. 10-year Treasuries ticked up 1 bps to 3.15 percent. Down-under, the Aussie 10-year yield rallied 2 bps to 2.65 percent on stronger trade balance numbers overnight. In Japan, the 10-year JGB yield declined 1 bps to 0.12 percent.

4. The Pound Breakouts On Brexit

The mighty USD retraced some of its recent strength against G7 and a host of emerging market currency pairs overnight.

The pound moved higher on two apparent Brexit breakthroughs. A letter from U.K. Brexit negotiator Dominic Raab to Parliament that disclosed November 21 as a possible date for an agreement with the EU, and a report that the U.K. has reached a post-Brexit deal for the financial services sector.

Note: Raab has since backtracked and admitted that there was no set date for the negotiations to conclude.

EUR/USD was higher by 0.5 percent at €1.1385.

5. U.K Manufacturing PMI Falls

Data this morning showed that conditions in the U.K. manufacturing sector slowed sharply last month. Output growth weakened, while new order inflows and employment both declined for the first-time in over two years.

The seasonally adjusted IHS Markit PMI fell to a 27-month low of 51.1; down from September's revised reading of 53.6 vs. 53.8.

Digging deeper, the weakness in total new orders was mainly centred on the consumer goods sector, as the intermediate and investment goods categories both posted mild expansions.

Foreign demand decreased for the second-time in the past three months as Brexit uncertainties and global trade tensions had negatively impacted inflows of new work from within the EU.

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