Market Brief Optimism Over Potential Brexit and USChina Deals Rules the Day

Risk assets rallied today on hopes for a deal on both Brexit and US-China trade. UK PM Johnson had a “positive and promising” meeting with Irish PM Varadkar, stoking optimism that the UK and EU will be able to reach a deal next week (prediction markets remain skeptical).
Separately, reports suggested there was a chance of a partial trade deal around agricultural purchases and currency levels between the US-China. While it would be far from the “big”, all-encompassing deal that President Trump has expressed a desire for, any progress would be better than traders expected earlier this week.
FX: The pound was by far the strongest major currency on the day, rising by more than 1.5% against its major rivals. The yen was the weakest major currency in risk-off trade.
US data: In another sign of a potentially slowing economy, US CPI came in at +1.7% y/y, below the 1.8% reading expected. Core CPI (ex food and energy) came in at 2.4% y/y as expected. That said, initial jobless claims dropped to 210k vs. 219k expected and previous, as the US labor market remains an economic bright spot.
Commodities: Gold dropped -1% on the day on declining safe haven demand, while oil tacked on more 2% today.

US indices closed higher on the day, though off their highest levels.
Energy (XLE) was the strongest sector on the day, boosted by the big rally in oil prices. Utilities (XLU) were the weakest.
Stocks on the move:
- Utility PG&E (PCG) dumped -29% after a judge ruled to allow bondholders to push for the company’s bankruptcy.
- Delta Airlines (DAL) dropped -2% after issuing weaker-than-expected guidance for next quarter.
- Ra Pharmaceuticals (RARX) exploded 101% higher after Belgian pharmaceutical company UCB agreed to acquire the company for $2.5B.
- Kroger (KR) shed -3% after an analyst at Jefferies criticized the grocer’s investment in Ocado.
- Retailer Bed, Bath, and Beyond (BBBY) rocketed 21% higher after announcing former Target executive Mark Tritton as CEO.

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