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Negative sentiment drives trading as trade tariffs expected imminently

Escalating trade tensions will once again be a central theme to driving sentiment and trading this week, with President Trump widely expected to levy tariffs on a further $200 billion worth of Chinese imports, potentially as soon as today. The elevated trade concerns sent Asian markets lower overnight and are weighing on European bourses as the opening bell approaches.

The decision to start to apply tariffs, which are rumoured to be 10%, rather than the initially higher level of 25%, is expected despite Treasury Secretary Steve Mnuchin’s attempts to restart talks with the Chinese to try to resolve trade difference between the two powers; once again highlighting the haphazard approach of the White House in its America First protectionist policies.

Trade concerns have been simmering for months and it is growing increasingly clear that neither side is prepared to back down, which is fanning fears that the world's two biggest economies are heading towards a trade war. For now, developed markets are taking heart from the scant signs the trade spat is able to shake the global economy.

Emerging market fears ease

Fears surrounding the emerging markets crisis are easing thanks to Turkey’s proactive policy move last week and Argentina’s austerity budget. Whilst these moves are helping to ease fears, structural issues relating to emerging markets remain, with the potential to rise to the surface once again, in the coming weeks.

Whilst US equity markets largely shrugged off trade and EM concerns on Friday, Asia looked vulnerable overnight. How well the markets manage to perform this week depends largely on trader’s ability to traverse across these two principal risks.

Will a recovering housing market boost housebuilders?

On the FTSE, housebuilders will be under the spotlight as trading kicks off for the week, following encouraging Rightmove house price data. The index showed a return to growth in house prices in September, amid signs of recovery in London and a pickup in sales of the capital’s most expensive properties. This is some welcome good news for the house builders after the UK housing market has been struggling thanks to slower economic growth, Brexit fears and weaker confidence, all of which have been more acutely felt in the capital.

Plans for Vodafone

Vodafone will be in focus following the unveiling of plans by the incoming CEO, Nick Read, to slash the firms €31 billion debt pile. Plans, including mast sales and cutting around 8% of the workforce come after an uninspiring outlook from the most recent trading update, owing to steep competition in French and Spanish markets. With more details due in November, investors will be weighing up whether these outlined plans are sufficient to turn the firm around and halt the slide in Vodafone’s share price, which is down 20% over the year.

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