Sterling jumps on report of Brexit progress, US stocks rally again

The British pound rallied on Thursday on reports of a post-Brexit financial services deal, while US stocks advanced for a third day in a row, helped by new optimism over US-China trade relations.

Analysts pointed to a report in The Times of London that British Prime Minister Theresa May had reached a deal with Brussels to allow British financial companies continued access to the European market after Brexit.

Sterling surged to $1.3004, up 1.9% from the prior session.

British officials and the EU's chief Brexit negotiator Michel Barnier both later said agreement had not yet been reached on UK financial services retaining access to European Union markets after Brexit.

Barnier called the report misleading while British officials said good progress was being made although a deal had not been agreed.

But market analyst David Madden at CMC Markets UK said "the fact that (UK officials) didn't completely dismiss the report suggests there is some truth to the article."

"Finance is the lifeblood of the UK economy and any barriers towards facilitating transactions with the continent would likely deal a deathblow to UK GDP," said Boris Schlossberg of BK Asset Management.

Gains by sterling were unaffected by the Bank of England's decision, as expected, to keep its key interest rate at 0.75%, as well as trimming its growth forecast for next year when Britain exits the European Union.

Wall Street rallies

Europe's stock markets ended the day mixed, with London's FTSE 100 dragged lower as oil stocks fell along with the price of crude.

However the rally in the US continued unabated, with the Dow finishing up 1.1%.

US stocks were in the green most of the day, picking up momentum after US President Donald Trump reported on Twitter after a discussion with Chinese President Xi Jinping that talks were "moving along nicely" over a trade fight that has upset investors.

While investors are likely to take Trump's comment with a grain of salt so soon to next week's congressional elections, the statement was still encouraging, said Maris Ogg, president at Tower Bridge Advisors.

"We've learned in the last year that tariffs are probably not a strategy but a tactic," Ogg said. "So the market gets a little encouraged when it seems there might be some light at the end of the tunnel."

Ogg also cited "momentum carryover" after positive sessions the prior two days helped the market to correct an "oversold" situation.

Most Asian stock markets grinded higher on Thursday, tracking Wall Street gains from the previous day and a Chinese pledge to support the world's number two economy.

The healthy gains to kick off November come as dealers look to put behind them one of the worst months in recent years, which saw trillions wiped from valuations and confidence battered in October.

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