Financial market research and analysis

Wall Street closed deeply in the red on Monday. The Dow shed over 600 points and the S&P dumped 2.5% in the worst trading day since 3rd January. Investors rushed to take risk off the table as China raised tariffs on US imports, a retaliatory measure to the increase by Washington last week. Whilst the Dow and the S&P were hit hard, the Nasdaq was hit harder.

The Nasdaq plunged 3.4% as the tech sector was not only hit by trade concerns but also by news that the Supreme Court has said that App Store customers can sue. Apple. Apple lost 5.8% on the news, Amazon was off 3.5% and Microsoft dropped 3%. In general, the stocks which had been among the top performer’s this year suffered the worst losses.

Asian markets extended losses overnight, although the selloff was limited compared to the bloodbath on Wall Street. European and US futures are also in the black, with risk appetite finding some support from Trump’s comments that he expects trade negotiations to be successful. Market sentiment remains very fragile. Whilst Trump’s comments offered some support to market sentiment overnight we suspect it will take more than that to repair the damage done. Investors will want to see concrete evidence of progress after Trump’s 180 degree turn last week spooked the markets.

More to come?

The fact that Trump is considering slapping tariffs on a further $300 billion of Chinese imports is keeping investors jittery. The impact on the Chinese economy would be significant, potentially pulling China’s GDP a couple of percentage points lower. As we have seen, concerns over a slowdown in China can impact sentiment towards the health of the global economy severely.

Dollar steady despite increased expectations of a Fed rate cut

Flows into safe havens such as US treasuries have remained strong. US treasury yields remain nears 6-week lows. CME Fed Funds futures show the market is now pricing in a 70% probability of a Fed rate cut this year, up from around 50% after the previous Fed meeting.  Whilst the dollar is trading flat versus a basket of currencies, the euro is strengthening versus the buck, up 0.15% in early trade on Tuesday.

GBP sub $1.30, UK jobs data up next

The pound remains firmly below the key $1.30 level as the Tory Labour divide looks set to bring cross party Brexit talks to an end. Whilst investors will focus on Brexit developments, or the lack thereof, the UK jobs report could add pressure to the pound. Unemployment is expected to remain steady at 3.9%. Wage growth, the most closely watched component of the report is expected to show that wage growth slipped back from its decade peak of 3.5% to 3.4% in the three months to March.