A solid kick off for the U.S. earnings season, Theresa May surviving a vote of no-confidence, China’s central bank pumping record liquidity, and policymaker assurances to take the right actions were all key factors in supporting risk in financial markets and keeping equity bulls in charge.

Upbeat U.S. bank earnings boosted investors’ confidence this week. Goldman Sachs was up 9.5% on Wednesday after beating estimates by a wide margin on both top line and bottom line. Yesterday’s surge in its stock was the best reaction to earnings results in a decade. Bank of America also crushed expectations and ended the day 7.2% higher. The numbers released so far from U.S. banks managed to ease some concerns on the economy. However, confirmation is still needed from other sectors - mainly the cyclical ones - to provide better guidance on how consumers are behaving, which is critical to future earnings.

Prime Minister Theresa May’s government survived a no-confidence vote yesterday, just one day after her humiliating Brexit defeat. This result seemed to have been properly priced into the Pound given the slight reaction to the news. A snap general election appears to be out of the equation now, but there is still a high probability of a second referendum taking place. Although a soft Brexit remains to be the most likely scenario, it’s a tough call to make. Expect an extension of Article 50 to provide a further boost to the Pound, but if May starts to open up to the idea of a second referendum, Sterling may easily jump above 1.30.

Additional stimulus from China also managed to boost sentiment. After cutting taxes in response to disappointing industrial production figures and falling exports, monetary authorities injected a record $84 billion into the country's banking system. Such actions indicate that China will continue to use all available tools to reduce the impact from ongoing trade tensions with the U.S. However, this will only have a short-term impact on markets and only some sort of agreement with the U.S. to end the current trade tensions will provide a sustainable positive influence.

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