| By Julia Horowitz • Friday, December 13 | | | | Happy Friday from a bleary-eyed London, where reporters (including yours truly) stayed up late into the night tracking the UK election results. 🇬🇧 More on that below.
In today's newsletter: From trade to Brexit, the outlook for investors gets more concrete. Plus, Christine Lagarde vows to bring her own style to Europe's central bank.
US stock futures point higher after racing to record highs on Thursday. Markets in Europe shot up in early trading, following big gains for stocks in Asia.
▸ Forwarded this newsletter? Want global markets news and analysis from CNN Business reporters every morning? You can sign up here. | | | What's happening now in markets: MARKET DATA AS OF 6:20 AM ET | | MARKET FLASH Investors wake up to a little more certainty
Uncertainty regarding two of the biggest headwinds facing the global economy — trade and Brexit — appeared to lift on Friday, clearing the way for investors to pile into the riskier assets at the close of a blockbuster year.
On trade: President Donald Trump has signed off on a "phase one" trade deal with China, according to US officials and others familiar with the agreement. The deal delays a new round of US tariffs on roughly $160 billion worth of Chinese goods, which had been set to take effect on Sunday.
On Brexit: Prime Minister Boris Johnson swept to victory in the UK election. With a solid majority in parliament, the Conservative leader can take the country out of the European Union by January 31 — removing some of the uncertainty that has hung over businesses and the economy for more than three years.
Relief is rushing through global markets. European shares soared Friday past the benchmark STOXX 600's record close. The pound surged and remains near $1.34, its highest level since mid-2018. It's at its strongest against the euro since 2016. | | Other market movers: The FTSE 250 index of mid-size British companies jumped more than 4% in early trading. The UK election ends Labour Party leader Jeremy Corbyn's hopes of transforming the UK economy through a spree of left-wing policies that scared the business community — boosting shares of companies that had been in the firing line.
Why stocks are up: Investors believe a big majority in parliament will give Johnson more time to negotiate a new relationship with the European Union following Brexit. He had promised to rush through a trade deal by the end of 2020, when transitional Brexit arrangements expire. But Thursday's result could give him more space to draw out the timeline, avoiding the abrupt imposition of major barriers between Britain and its largest export market.
"He will be free to ignore the views of the more extreme elements of the party," Adam Cole, head of foreign exchange strategy at RBC Capital Markets, told me. "An extension of the transition beyond the end of 2020 becomes that much more likely."
Strategists are sounding notes of caution, however. The talks ahead are poised to be extremely difficult. "This is not the end of the Brexit story," Goldman Sachs told clients Friday. | | VOICES The cost of Brexit "The market is in danger of conflating the removal of political uncertainty with the reversal of the economic impact of Brexit. That strikes us as being highly optimistic verging on the implausible."
PAUL MEGGYESI, JPMORGAN HEAD OF GLOBAL CURRENCY STRATEGY
Read more from CNN Business.
| | TRADE MONITOR What's in a 'phase one' US-China deal? | |
The United States is ready to move forward with an initial trade agreement with China, according to US officials and others familiar with the deal. The question from investors now is what that agreement actually entails — and whether Beijing is really on board.
Said to be included: The "phase one" deal will reportedly avoid imminent US tariffs and reduce the rates of existing duties in exchange for a Chinese promise to purchase American farm goods. New tariffs on nearly $160 billion in Chinese-made consumer electronics and toys had been scheduled to go into effect on Sunday. Some existing US tariffs will be reduced by half, one source told CNN.
Not included: Major structural changes to China's economy that had been a big priority for Trump.
That leaves the door open for tensions between the world's two biggest economies to flare up again. A fight over technology that's centered on Chinese phone and telecom equipment company Huawei, which the US has branded a national security threat, also looks poised to create future problems.
"It's a sign of confidence, but not a landmark breakthrough," Willy Lam, a professor at the Center for China Studies at the Chinese University of Hong Kong, told my CNN Business colleague Laura He.
+ Watch this space: Beijing has yet to reveal any information about the deal.
| | UP NEXT
US retail sales for November arrive at 8:30 a.m. ET.
Coming this weekend: A fresh wave of US tariffs on Chinese goods had been set to take effect on Sunday. Now attention shifts to the details of the "phase one" agreement between Washington and Beijing.
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WHAT WE'RE READING AND WATCHING
▸ US officials are considering a big antitrust move against Facebook (WSJ)
▸ Meet the biggest bank you've never heard of (CNN Business)
▸ The world's longest flight will fly on Airbus planes, not Boeing (Bloomberg)
▸ Can IPOs rebound after a tough 2019? (CNN Business)
▸ China's companies binged on debt. Now they can't pay the bill (NYT)
▸ Remember HQ Trivia? It's trying to make a comeback (CNN Business) | | | FINAL WORD Christine Lagarde wants to be a wise 'owl'
Christine Lagarde has a message for investors and the media: She's going to do things her own way as president of the European Central Bank.
"I will have my own style," she told reporters on Thursday. "Don't over-interpret, don't second guess, don't cross reference. I am going to be myself and therefore probably different."
As expected, the ECB said it would hold interest rates steady, while pledging to continue purchases of €20 billion ($22.3 billion) in financial assets per month for "as long as necessary." The ECB now expects Europe's economy to grow by 1.2% in 2019, an upgrade from an earlier forecast of 1.1%. For 2020, it's expecting growth of 1.1%, a downgrade from 1.2%.
With policy on hold, attention focused on Lagarde, who started on the job in November. She has pledged a top-down review of the central bank's strategy, and has made clear she does not want to get drawn into the infighting that followed the ECB's controversial decision to restart the stimulus taps in September.
"I'm neither a dove nor a hawk," Lagarde said. "My ambition is to be this owl." Owls, she noted, are "associated with a little bit of wisdom."
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