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US may avoid further shutdown as wall deal reached

The big news of the day for US markets is the fact that some form of deal seems to have been reached between Congress and the White House over funding for Trump’s border wall project. Although the details have yet to be confirmed by the administration, it represents a much more watered-down funding package, which will allow both sides to claim victory of a sort – e.g. a shorter wall and a smaller budget. The key issue is that it should avoid another US government shutdown at the end of the week, which would not have been greeted well by the markets.

The S&P 500 had a fairly range bound day yesterday and closed marginally up. But despite the potential for good news, US traders are focused on ongoing trade talks in China. Hence the USD and US stock indices have been a little directionless so far this week.

Debenhams thrown new lifeline

Debenhams has received a stay of execution, obtaining a 12 month credit facility. This will allow the struggling department store to carry out further refinancing. The package also buys management of the firm time to start selling off some assets. Will it be enough to save the company? At this stage it is too early to tell, but it certainly looks more viable as a value play, with the share price up by 35% since the news broke. Much will hinge on the management team's ability to make Debenhams a more viable concern.

Market waiting for news of possible revised Brexit deal

On the Brexit front the market – and Parliament - is expecting a possible update on talks from Theresa May today. Rumours are circulating that there may be a new deal in the pipeline following talks between EU chief negotiator Michel Barnier and UK Brexit Secretary Stephen Barclay yesterday. Some 40 to 60 Labour MPs are also thought to be considering backing an improved deal if May is able to serve one up. It remains to be seen whether they have succeeded in resolving the contentious Irish backstop issue.

From a technical perspective, the GBP is still looking bearish, with strong selling pressure due to the absence of a deal. The FTSE continues to pop up whenever we see the market punishing sterling, but evidence that Brexit is really starting to affect UK economic growth will be bad news for equities and the pound in the medium to long term.

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