Financial market research and analysis

The Dow & S&P fell for a second straight session and Asian shares also looked shaky overnight as investors digested key comments on US – China trade relations, weak Chinese data and a growing list of geopolitical issues.

Comments from US Trade Representative Robert Lighthizer that a trade deal was not yet certain unnerved investors, putting the brakes on trade optimism and resulting in risk coming off the table. Lighthizer's comments that China would need to do more than just buy more US products suggests that the distance between the two sides on key issues is still substantial. These comments from Lighthizer came as he testified in front of the House Ways and Means Committee. The market rightly or wrongly has got ahead of itself in terms of trade talk optimism, we are now seeing traders come back to reality, which explains the recent selloff.

Weak Chinese Factory Orders Rattle Traders

As if on cue more weak data poured out of China, pulling the Shanghai composite index lower. Factory activity in China contracted for a third straight month in February as export orders fell to the lowest level since the global crisis. Further evidence of a slowdown in China hit risk sentiment, The realisation that there is still considerable work to be done for the US and China to reach a trade agreement, plus further evidence of economic activity in China slowing is leaving little for traders to cheer on Thursday. European bourses look set to follow Asia lower and US futures are also pointing to a softer start.

The reality is, these are complex issues so a simple laid out solution was never going to happen. We can expect differing opinions on US – China trade deal progress to throw sentiment around and raise market volatility.

India – Pakistan Tension A Local Issue For Now

The escalation in tensions on the India Pakistan border is another geopolitical tension traders are keeping on the radar. Right now, this is a regional issue and we are not seeing it being reflected in the broader market. Investors will keep watching from a distance, poised to react if necessary.

Pound Steady Above $1.33

The pound was remaining above $1.33 in early trade on Wednesday, holding on to most of Tuesday’s gain after Parliament approved an amendment that set out in writing Theresa May’s pledges made on Tuesday regarding a no deal Brexit and delaying Brexit. The pound at these levels is increasingly confident that a no deal Brexit is off the table. We expect the pound could continue to strengthen across the coming two weeks before the meaningful vote on 12th March.

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