Financial market research and analysis

After a mixed session in Asia overnight, European bourses are looking to start trading for the new week in a mixed fashion. Whilst this week sees a busier economic calendar for traders than last, with central bank rate decisions from both the ECB and the BoE, it will take a lot of good news to distract traders from escalating trade tensions and unfolding emerging market crisis.

Whilst European and Asian markets traded heavily lower across the previous week, the Dow Jones was looking resilient in comparison. However, Friday, a sudden jump in US wages stoking fears of higher borrowing costs and renewed trade threats from President Trump, sent the US shares lower across the board and the dollar higher.

Trump threatened another round of trade tariffs on a further $267 billion worth of Chinese imports and promised that the tariffs on $200 billion worth of Chinese imports would take effect very soon. These latest threats highlight an apparently random nature and lack of planning in Trump's approach, which is enough to make even the most resilient of traders increasingly nervous. Calls from businesses against the levies have fallen on deaf ears in the White House, as Trump is making it his mission to tariff all imports from China.

Trade tension casualties

The longer these trade tensions continue, inevitably the more causalities that will arise. Volvo’s Chinese owner Geely delaying Volvo Cars IPO over concerns of valuation in light of the trade wars, plus a wobble in Apple’s suppliers in Asia overnight show that the impacts of these tensions are starting to show themselves more clearly in the markets and this will only continue until a breakthrough is agreed.

US jobs market strong despite international trade tensions

The dollar was steady overnight after jumping on Friday amid evidence of accelerating wage growth which renewed expectations of two more rate hikes from the Fed this year. Whilst the US labour market has been tightening for some time, wage growth has been slow to pick up. Friday’s figures showed that wages grew at the fastest rate in 9 years in August indicating that there is little slack left in the labour market.

Brexit deal closer?

Brexit and GDP data will grab investor attention on Monday. News over the weekend that the EU is ready to give EU Chief Negotiator Michel Barnier mandate to close a Brexit deal is expected to boost optimism that a Brexit deal could still happen before the October deadline. This would be some well needed good news for PM Theresa May who is under heavy pressure from the hard-line Brexiteers in her party and particularly from ex-Foreign Secretary Boris Johnson who launched a scathing attack on Theresa May & her Brexit plans, over the weekend. The pound was marginally lower versus the dollar overnight but inched higher versus the euro.

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