Stocks slip as US-China trade talks pushed back

Summary:

• No US-China trade agreement this month

• UK MPs expected to seek Article 50 extension

• German growth to fall sharply

There’s been a quick swoon in European stock markets and US futures in recent trade after news broke that a meeting between US President Donald Trump and President Xi Jinping has been pushed back, dashing any hopes of an end to the trade tensions this month. The news isn’t a major negative shock in itself but with stock markets on both sides of the Atlantic close to their year-to-date highs it comes at a potentially key time and will test the mettle of bulls who have enjoyed control of the tape in recent months.  

Pound pulls back in choppy trade

After attempting to make a break higher last night, there’s been a bit of a pullback in the pound this morning with the Brexit merry-go-round showing little sign of stopping anytime soon. On the face of it the parliamentary vote last night takes no deal off the table, and later on the house of commons will likely vote in favour of an extension of Article 50. The problem that remains for the UK is that while parliament have signalled what they don’t want, with votes against both May’s deal and no-deal, they still haven’t indicated a clear majority for what they do want - apart from more time to decide.

MPs know what they don’t want...

There’s some speculation that MPs will shortly hold a series of indicative votes to offer their opinion on a range of Brexit alternatives, but there’s a fair chance that rather than this seeing parliament unite behind one clear plan, it will simply further highlight how ruptured lawmakers are. The pound will likely remain highly sensitive to headline risk in the foreseeable future, but with the range of outcomes now seemingly ranging from May’s deal to increasingly softer versions of Brexit, a lot of the worst downside risks are being priced out the currency and this may pave the way for further gains.       

German growth to fall sharply

A Munich based think-tank has cut its 2019 growth forecast for the eurozone’s largest economy, with GDP now seen at 0.6% from 1.1% previously. The Ifo Institute has offered a pretty dim view of the future prospects, with predictions well below the 1.5% seen in 2018 which itself was the slowest pace of growth in five years. Despite the news, the DAX30 (DE30 on xStation) was trading close to its highest level of the month at 11635 shortly afterwards, but the market has taken a turn for the worse on the US-China news.

The DE30.cash has tumbled in the past hour on the US-China news. Longer term the market remains in a broad range from around 11390-11700. Source: xStation