Financial market research and analysis

Steep declines on Wall Street have been shrugged off in Asian markets overnight and European shares look set for a positive open. US shares had initially held up relatively after President Donald Trump threatened another $100bn in tariffs against China. Few were willing to hold on  over the weekend after US Treasury Secretary Steven Mnuchin acknowledged the possibility of a trade war. Trump tweeted over the weekend with respect to China that ‘Taxes will become reciprocal & a deal will be made on intellectual property.’ Trump’s softened stance offers some hope for calm in his trade dispute with China.

Compounding the issue, Federal Reserve Chairman Jerome Powell showed no signs of support for markets by indicating the Fed would push ahead with more rate hikes this year. The New Fed Chair seems determined not to be swayed by argument of tighter ‘financial conditions’ generated by lower stock prices and higher bond yields. It may take another 10% decline in US indices to truly test Powell’s nerve.

The resiliency of the tech sector will be another test for markets on Monday after it was learned Facebook has suspended another data analytics firm. The news of another firm using Facebook data the same way as Cambridge Analytica makes the ‘one bad actor’ defence from Facebook implausible. Investors are holding their nose until CEO Mark Zuckerberg’s testimony to Congress this week.

The dollar has regained some of the declines seen on Friday after lower than expected job gains were reported for March. Forex markets seemed to be putting more weight on the data than on central bank speak. The chairman’s comments should act as additional support the next time the dollar benefits from a flight to safety. There is little in the way of top tier data being reported on Monday. The German trade balance could come under more scrutiny than normal given the current political emphasis on trade.

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