European Markets Lower On Potential Fresh Tariffs

The FTSE is trading higher but most other European gauges are in the red as the US is looking to broaden tariffs on European products including chemicals, metals, whiskies and cheese. The decision hinges on the outcome of the World Trade

Organisation’s case over European subsidies for plane manufacturer Airbus and could potentially affect just under 100 items with an annual trade value of $4 billion. The DAX, which is already being hit by the Sino-US trade war and existing US tariffs on German car makers, has lost 0.15% in early trade. The FTSE is in a better shape, up 0.18%, as the slightly weaker pound is helping export-orientated firms.

The signals from the Asian markets were slightly less positive than Monday as the glow of the US-China trade truce wore off, particularly after President Trump commented that while phone conversations between US and Chinese trade representatives have already started, the final outcome of the talks will have to be more tilted in the favour of the US because of China’s years-long advantage.

US markets will start seeing thinner volumes ahead of Thursday’s holiday but this could also bring in more volatility over the next day or two.

Johnson’s strong language hurts pound

Sterling has lost ground this morning, down 0.13% against the dollar after Boris Johnson’s campaign manager laid out his plans for future talks with the European Union, using much more hawkish language. Johnson’s message to the EU is that the bloc can either accept his new free trade proposal or the UK will walk out without a deal.

While the tone is very much designed to attract grass roots support for the Tory leader candidate it will backfire in business circles as they see no-deal as the worst possible outcome. The pound has dropped to the lowest level in two weeks to trade at $1.262.

OPEC still in session, oil prices nearly flat

Oil prices are moving in a much narrower range than in the last few trading days as the OPEC still remains in session in Vienna. Investors fully expect that OPEC members will put in place a six month extension to the existing production cuts to try and balance out the declining demand caused by the US-China trade war.

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