Presented by Charles Tyrwhitt

Hi John, here's what you need to know for November 8th in 3:15 minutes.

☕️ Finimized over a darkside at Pigtrain in Denver, Colorado (9°C/48°F)

⏳ Keep it brief

More Trade War Optimism

What’s Going On Here?

On Thursday, the US and China agreed to reduce trade taxes (a.k.a. tariffs) on each other’s goods. It’s one small step for trade-kind towards a long-hoped-for deal between the two biggest economies on Earth.

What Does This Mean?

Both countries have been trading, er, trade blows for years now, costing both economies growth – but recently, cooler heads appear to have prevailed. Tariff increases have paused; instead, the US and China are discussing lowering some taxes and potentially removing others altogether. It’ll likely happen in stages – the first of which is now due to be signed, sealed, delivered next month. Lower tariffs will make it cheaper for both countries to buy each other's products, which should encourage spending by governments and companies alike – boosting earnings and economic growth.

Why Should I Care?

For markets: Optimism on a record high.
Keen-eyed investors who’d previously seen a partial deal in the offing bought up stocks in China, Europe (a third of the region’s economy depends on China), and the US – where stock prices hit record highs earlier this week. After a brief fall – on news that confirmation of a US-China deal wouldn’t come as soon as hoped – Thursday’s announcement pushed US stocks up to a new record high.

The bigger picture: Stubborn investors might cause a “melt up”.
Earlier this year, investors thought the US central bank would increase interest rates – which would make it harder for companies to grow profits – rather than cut them thrice as it has. That wrongfooted several investors and analysts – including those at Saxo Bank, which this week sheepishly reversed its previously negative opinion of stocks. Investment managers – especially at the end of the year, when they report their own performance – are loath to be wrong for too long. And as some change their minds and buy stocks, their new demand for shares could push prices up further – a.k.a. a melt up (tweet this).

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Snail Trail

What’s Going On Here?

Italy’s largest bank, Unicredit, and Germany’s second-largest, Commerzbank, both reported third-quarter results on Thursday. The two are slowly sliding in opposite directions: Unicredit up and Commerzbank down.

What Does This Mean?

Commerzbank’s update disappointed investors – plus, the bank now thinks its profit this year will be lower than it was last. That’s partly down to a persistently weak German economy, where Commerzbank does the majority of its business – and negative eurozone interest rates, meaning banks have to pay rather than receive interest on their cash.

But credit where Unicredit’s due: the Italian bank beat investors’ third-quarter predictions. That was thanks to earnings from its risky trading business offsetting pains from its falling interest income. But, according to the European Union's updated economic forecasts (also released on Thursday), Italy's economy’s not likely to recover much any time soon. Its already too-high debts will increase, which might make Unicredit's future progress more al dente than its investors hope.

Why Should I Care?

For markets: Stocks show investors’ feelings.
Commerzbank’s stock fell 1% after its report while Unicredit’s rose 6%. Given how important a country’s banks are to its economy, those share price moves offer a clue as to how investors are feeling about Germany and Italy. European banks and their investors alike will hope that the European Central Bank finds new ways to boost the region’s economy and, by extension, their prospects. In the UK, meanwhile, the Bank of England announced the country’s positive interest rates would be left unchanged. (Though a couple of pesky decision-makers wanted to lower rates, which would’ve been bad news for British commercial banks.)

The bigger picture: No bank – or continent – is an island.
The US’s trade wars hurt Europe too, by way of weaker Chinese spending and direct tariffs against the bloc. But investors are hopeful that a US-China truce will turn China once again into a voracious buyer of European companies' wares – boosting their earnings, eurozone economic activity, and banks' fortunes in tandem.

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💬 Quote of the day

– Og Mandino (an American author)