Financial market research and analysis

With part of Asia closed for public holiday, those Asian markets remaining open nudged higher overnight. Meanwhile, European and US futures are pointing to a stronger start on Monday, despite uncertainty surrounding the next steps in the US – Sino trade dispute and amid a slowdown in the global economy.

The end of last week saw President Trump confirm that the US was continuing trade talks with China, but that the US was not ready to make a deal now. His comments helped drive already fragile equity markets lower as traders pulled funds from riskier assets.

The ongoing uncertainty stemming from the trade dispute has sent traders on a rollercoaster ride over recent weeks and months and is keeping investors on edge.  Last week, central banks adopting a more dovish policy stance to counter the impact of the dispute on their slowing economies added to evidence of the damaging effect that the trade war is having, whilst heightening concerns that the global economic slowdown is gathering pace. With any trade deal before the US elections in 2020 now looking increasingly unlikely, the reality of a global recession is starting to hit.

German GDP data in focus

Positive news is a rarity right now. Last week, the US treasury markets flashed their strongest warning yet of a recession as 3 month and 10-year bond yields inverted. UK GDP data showed that the UK economy unexpectedly contracted in the second quarter; German data has been one disappointment after another. Investors will now look ahead Wednesday’s German GDP release which is expected show that Europe’s largest economy contracted in the second quarter, heightening fears of a recession.

Safe haven demand remains strong

Whilst equity markets are set to head cautiously higher on Monday, flows into safe havens remain strong highlighting the level of fear that remains in the market. Traditional safe haven, Japanese yen advanced in early trade as it targets 105. The yen is currently up 6% in the last 4 months and a move towards 100 before the end of the year now looks very plausible. Gold is seen pausing for breath around $1500 mark after soaring to a fresh 6 year high last week.

Oil drops on demand fears

After weekly losses of 2% in the previous week, oil kicked off the new week on the back foot. A souring global economic outlook has led to a cut in the growth outlook for oil demand. Oil demand growth is at the slowest level since 2009. The OPEC+ group will continue with supply cuts until 2020. However, evidence is mounting that more may need to be done to keep oil prices supported.