Delays to tariffs were met by a huge relief rally on Wall Street. SPX both added almost 1.5%, with tech and Apple leading the charge. European indices also flipped from red to green and ended the day in positive territory. We’ll see if this rally has legs, or it’s merely a short squeeze.

Europe however is finding it hard to cement yesterday’s gains and the major indices all in the red. The DAX fell 1% in early trade on Wednesday,with the FTSE 100 down 0.3%.

Asia took its cue from Wall St and rallied overnight. Despite the ongoing tensions in Hong Kong and eruption of violence at the airport, the Hang Seng has gained half a percent. China’s yuan rose.

But all the risks cannot be whitewashed so easily. The delay to tariffs looks more like a temporary reprieve for domestic reasons rather than a genuine signal of willingness to talk with China. The president didn’t like what he saw in the markets and decided to intervene. Hong Kong remains a trouble spot – the situation remains tense and we see further escalation as a real risk.

Remember up until now the narrative has been that China’s paying the tariffs…only ever a tweet away…

Kaput: Germany’s economy shrank 0.1% in the second quarter, matching estimates. Following yesterday’s shocker of a Zew report, it’s hard to see this going any other way than more and more ECB stimulus. The export heavy economy is suffering as global trade contracts.

Treasury yields bounced but 2s10s came incredibly close to inversion and remain wafer thin. The 10yr has since retreated back below 1.7% to 1.674%, with the 2-yr at 1.638%.

Gold got stopped in its tracks, getting clobbered by over $50 at one stage. But it’s found support and has inched back to $1500 again.

Oil recovered too, jumping about $2 through and holding $60 on the Brent contract. Bulls would like to see some consolidation here before pushing up to next big level , the swing high at $65 – that’s where things really get interesting again.

FX – still very rangebound in GBPUSD and EURUSD, finding it very hard to see any direction. The yen came off big style but USDJPY has come back to 106.40 and should try again to regain 105.

On Brexit – the anti-no-deal (pro-deal?) MPs are mustering the troops and preparing to assail the citadel. Early September is when this kicks off. GBPUSD is likely to be tightly range bound until then. Shorts are crowded and could face a squeeze but the longer no deal remains likely the more downside to sterling. GBPUSD was holding the line at 1.2060 without much cause to shift – CPI figures offered little reason to bid up the pound despite marginally beating estimates. EURUSD was last a shade off its 1.12 anchor point 1.11750.

Overnight data shows growth in Chinese industrial production fell off a cliff in July, plunging to its weakest level in 17 years. Growth dipped to 4.8% against 5.8% expected, and down from 6.3% in June. Tariffs and the wider slowdown are biting.

Better data from Japan, where core machine orders were at the best in a year. On a monthly basis the 13.9% increase was the best in 15 years.