Theresa May will address Conservative MPs shortly, ahead of tonight’s confidence vote.

The City has already given its verdict, though, sending the pound up by 1.75 cents against the US dollar today to $1.266, recovering some of its tumble earlier this week:

Ken Odeluga of City Index says the markets are quite buoyant, despite the British government wobbling on the brink of collapse.

He reckons some traders are calculating that Brexit could yet be halted.

The news that enough Conservative MPs have submitted a letter to trigger a No Confidence vote in is seismic. But markets have long been willing to look past heightened hard Brexit risk if events take a turn that could avoid Brexit entirely. Such thinking looks to be in play again.

For one thing, whilst Theresa May has pledged to fight the confidence vote with everything she’s got, she has also toughened warnings to Brexiteers about the chance of a No Brexit. Her statement earlier noted that a new leader “wouldn’t have time to renegotiate a withdrawal agreement…so one of their first acts would have to be extending or rescinding Article 50, delaying – or even stopping it”.

At the same time, remain campaigners have dropped support for the ‘Norway-plus’ alternative Brexit deal to concentrate on a second referendum. Senior opposition Labour Party figures, officially neutral to the idea, have moved almost to full endorsement. Leader Jeremy Corbyn said on Sunday that another referendum would have to be “qualitatively different to the one held before”.

Despite the latest drama in Westminster, there’s not as much panic as you might expect when a prime minister’s job is hanging in the balance.

Professor Costas Milas of the University of Liverpool explain:

It definitely looks chaotic at the moment but we have not reached levels of national crisis yet.

Economic policy uncertainty (as measured by related articles in 650 UK newspapers) currently remains 12 times lower than what we observed the day after the Referendum vote and also 2 times lower than April 18 2017 (when Mrs May announced a snap election). With this in mind, we are still far from a large-scale crisis.

However, UK economic policy would look rather more uncertain if Theresa May was ousted by her own party tonight...

To the extent that Mrs May survives the no confidence vote tonight, it looks more likely than not that she will take a much tougher stance against Conservative Brexiteers which should also reassure our EU partners that the British prime minister remains a strong and indeed the only negotiator (our side).

Any other outcome tonight will trigger a surge in policy uncertainty which will bring to mind the events of June 24th 2016 when Mark Carney and his BoE staff had to step in to provide emergency liquidity support to boost the economy.

The Dow is continuing to rise, now up 350 points at 24,721, as New York traders continue to hail signs of progress in the trade war.

The war of words, and tit-for-tat tariffs, didn’t deter a Chinese music streaming service from floating in New York today.

Tencent Music, the media wing of China’s internet giant, happily rang the opening bell today to mark the occasion.

However, the IPO didn’t raise as much money as the company hoped, as CNN explains.

Tencent Music, which dominates music streaming in China, said Wednesday that its listing priced at the bottom of its targeted range. By selling shares at $13 each, the company is raising nearly $1.1 billion, roughly half the amount it was reportedly seeking to raise earlier this year.The shares start trading Wednesday on the New York Stock Exchange with the ticker TME.

Tencent Music is going public at a volatile time for tech stocks, which have been rattled by the unpredictable trade war between the United States and China.

Commerzbank and Deutsche Bank have both declined to comment on those reports that the German government is working towards a merger.

German Finance Ministry spokesperson also said that they do not comment on media rumour or speculation....

Back in Europe, shares in Deutsche Bank have surged by 5% following reports that the German government is “intensifying efforts” to help the company.

This apparently includes smoothing the way to a merger with rival Commerzbank.

Bloomberg has more details:

The high-level discussions -- which have included Finance Minister Olaf Scholz and Deutsche Bank Chief Executive Officer Christian Sewing-- are looking at concrete ways the government can assist in a potential combination of the country’s two largest lenders, said the people, asking not to be identified discussing the private deliberations.

The talks include potentially changing existing laws to make the steps necessary for a merger less costly, they said.

Deutsche Bank’s shares hit fresh record lows this month, as the company struggles to shake off legal threats - including its involvement in the Danske Bank money-laundering scandal.

Industrial firms and miners are leading the rally in Wall Street today.

Construction equipment maker Caterpillar is up 2.3%, industrial conglomerate 3M is up 1.8%, and Boeing has gained 1.34%.

Technology firms are also rising, with Microsoft up 1.6%.

The pound is continuing to climb, and is now up 1.5 cents today at $1.264.

That makes it the best-performing major currency, as traders continue to predict that Theresa May will win tonight’s confidence vote.

However, it’s only a two-day high, and five whole cents below its levels in September.

If you’re just tuning in, there are three reasons why trade war optimism is trumping pessimism today.

1) The WSJ is reporting that China is revising its economic plan to give foreign companies more access. That could address some of the White House’s concerns.

2) Beijing has told US officials that it will cut the tariff on US cars from 40% down to 15%. That would take the levy back down its levels before the trade war flared up this year.

3) President Trump has hinted that he could use the arrest of Huawei’s CFO as leverage to hammer out a trade deal. He said “Whatever’s good for this country, I would do.”

Boom! Wall Street is surging in early trading, as traders grasp onto signs that the US-China trade war is cooling.

The Dow Jones industrial average has jumped by 306 points, or 1.25%, to 24,677 points.

The S&P 500 and the Nasdaq are both rallying, up over 1%.

Just in: US inflation has slowed, giving policymakers another reason not to tighten monetary policy much further.

Consumer prices were unchanged month-on-month in November, as the recent drop in the oil price fed through to people’s pockets.

That pulled the annual inflation rate down to 2.2%, from 2.5% in October.

However, core inflation (stripping out food and fuel) rose to 2.2% from 2.1% last month.

The Federal Reserve is likely to still raise interest rates again next week, but it could easily resist further hikes in 2019....

Wall Street is expected to pick up the baton, and rally when trading begins in under three hours:

Good news. European factories have shaken off the trade war jitters.

Eurozone industrial production rose by 0.2% in October rebounding from a 0.6% decline in September. That may show that growth is still holding up, despite various headwinds.

European carmakers are romping ahead today, on hopes that China will swiftly slash it tariff on American car imports.

In Frankfurt, Volkswagen has gained 2.2%, BMW is up 2%, while Daimler is 1.4% higher.

And in Paris, Peugeot are 3% higher, while Renault has gained 1%.

Neil MacKinnon, global macro strategist at VTB Capital, thinks investors should tread cautiously.

“The equity markets are taking encouragement from recent reports of a potential truce in the US-China trade dispute. China is said to be considering the removal of the increased tariff on US auto imports, with President Donald Trump saying he would intervene in the case of the arrested Huawei CFO if it would help secure a trade deal with China. Asian equity markets are all positive this morning as a result.

Of course, the newsflow regarding developments in the US-China trade dispute has been notoriously erratic and positive news can quickly give way to negative news.”

Deutsche Bank reckons a Theresa May win tonight would be good for stocks....while a defeat could send investors scurrying for cover:

The UK stock market is pushing higher.

Stocks are being boosted by trade war optimism and expectations that Theresa May will live to fight another day tonight.

The FTSE 100 is now up 73 points or 1% at 6880 -- on track for its second decent rally in a row. Miners, utility companies, tech firms and banks are all among the big risers.

The FTSE 250, which is more focused on the UK economy than the FTSE 100, has gained 0.75%. Retailers are struggling, though, following this morning’s profits warning from Superdry and the big loss at Dixons Carphone.

After some number crunching, the City expects the PM to win tonight’s confidence vote by a decent margin.

Fiona Cincotta, senior market analyst at City Index, says:

The markets seem somewhat shell-shocked by Westminster shenanigans and the FTSE’s first reaction was to move a notch higher on a mixture of hopes that Brexit might end up being delayed or potentially not even happen.

The pound may be calm now, but that would swiftly change Theresa May was forced from power by her own party tonight.

Hamish Muress, currency analyst at OFX, explains:

“Theresa May’s decision to fight for her job has left the pound in a state of limbo. With rumours now driving the currency as much as facts, the rest of the day for both market watchers and political analysts will be spent adding up Tory MPs and trying to work out whether the PM will be ousted.

Uncertainty is the word of the day, and all eyes will be on tonight’s vote. The prospect of a general election would not be good news, and it’s no secret that sterling strives for stability.”

Japanese bank Numura agrees:

More gloom from the UK economy: electronics retailer Dixons Carphone has posted a £440m loss -- but it insists it won’t cut jobs.

My colleague Jasper Jolly explains:

The big loss came in part because the company, formed through the merger of Dixons with Carphone Warehouse in 2014, was forced to write down the value of the mobile retailing brand which is now unprofitable, by £344m.

The loss, recorded in the 26 weeks to 26 October, compares starkly with a profit before tax of £54m in the equivalent period last year. Revenues rose by 2% on a like-for-like basis during the first half, to £4.9bn.

The company said it has “firm plans” for £200m of cost savings, with IT, supply chain and central office spending targeted, but the chief executive, Alex Baldock, said they would not be achieved through job losses among its 30,000-plus staff.

Ouch! Shares in UK clothing group Superdry have plunged by over 30%, after it hit investors with a profits warning.

Superdry, known for jackets, coats and hoodies, said it had suffered from “unseasonably warm weather” in November and early December. This has wiped out £11m in profits for last month, with a similar impact expected in December unless “trading conditions improve” (ie, it gets a lot colder.

Superdray also warned that “wider economic and political uncertainty” (hello Brexit) was also hurting. It now expected to post underlying profit before tax of £55m to £70m; analysts had been expecting £88m (earnings before interest and tax).

European stock markets have opened higher, fuelled by hopes of trade war détente.

The FTSE 100 is up 27 points, or 0.4%,at 6835.

Craig Erlam of trading firm OANDA says:

China has reportedly agreed to cut tariffs on US cars – from 40% to 15% - in a gesture aimed at de-escalating the trade war between the world’s two largest economies.

While the details of the cut are not yet known, the move reverses the tariff hike in July in response to those imposed by the US, which is hopefully a sign of more unwinding to come. It’s too early to be optimistic though as tensions remain high, with the arrest of Huawei CFO Meng Wanzhou further complicating the relationship, although Trump has suggested he could intervene, which makes the timing of the arrest all the more suspicious.