Financial market research and analysis

Trading was noticeably calmer in the previous session compared to Monday, as investors continued to digest comments from US trade advisor Peter Navarro, whose insistence that the US was not looking to target Chinese investments in Trump’s trade war served as tonic to the jittery markets.

Silence on the trade war radio provided investors with breathing space and the opportunity to reassess the probability of the White House going after Chinese investments. The lack of headlines also enabled traders to switch their attention to other areas of the market, like the rallying price of oil, allowing Wall Street to finish in positive territory.

Oil Rallies on Supply Disruption

Oil was a central driving force behind the positive close on Wall Street overnight, amid reports that supply disruptions are expected to outweigh the impact of the recently agreed OPEC increase in production. An earlier pledge by Saudi Arabia to lift production to a new record was shrugged off by the markets, as the US pressed allies to cut Iranian oil imports to zero by early November. Oil charged over 2% higher on supply disruption fears pushing through $76 per barrel. Traders will now look towards oil inventory data later today, signs of a strong drawdown in addition to the supply disruption fears could be sufficient to lift oil back towards $80 per barrel.

The US energy sector added 1% in trading overnight, a similar boost could be in line for European energy shares on the open. European bourses look set to follow Wall Street higher, despite some softness in Asia overnight.

UK House Prices Set to Fall?

With the Nationwide housing data due, the housebuilders are expected to be under the spotlight on Wednesday. The sector has been hard hit over recent sessions following profit warnings from Countrywide Estate agents at the beginning of the week, and a warning on a softer outlook from Berkeley Group a week earlier, as rising Brexit uncertainty and sluggish wage growth dampen the housing market. Nationwide House price index is expected to slip to 1.7% year on year in June, down from 2.4% the previous month.

Financial Stability Report

Pound traders panicked following dovish comments from Ian McCafferty’s replacement, Jonathan Haskel in the previous session, sending the pound back to support at $1.32. A dove replacing a hawk will do little to help the prospects of another rate rise.

The pound could come under more pressure today, as focus turns to BoE Governor Mark Carney, as he delivers the BoE’s financial stability report. This report is being released amid growing trade tensions between US & China, with concerns growing that a softening of the Chinese economy could hurt the UK’s financial stability by more than originally thought.  Traders will be watching closely for Carney to shed further light on the situation.

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