The FTSE is seen climbing mildly higher in early trading, taking its lead from Wall Street which rallied off the lows into the close, thanks to a softening of stance by President Trump on the steel and aluminium tariffs. Trump's advisers yesterday indicated that there could be exemptions from the tariffs for Mexico and Canada, and possibly other countries, considered on a case by case basis. This softening of stance could be considered a concession to congressional Republicans who were fiercely opposed to the ideas of pushing allies rather than the principal target, China.
This news picked Wall Street off its session lows, with the Dow finishing just 80 points down, recovering from an earlier 300 point drop. Meanwhile, the S&P closed almost a breakeven and the Nasdaq 0.3% higher
China to retaliate
Each session, the steel tariff story has a new twist and turn and today is no different. Whilst Hia has remained relatively tight-lipped over unfolding events, overnight they confirmed that they will retaliate with a justified, necessary response in the vent of a trade war with the US. As a result, industrial metal stocks are the biggest decliners on the FTSE, closely followed by miners.
House prices slide
House builders were under pressure on Thursday following yet another disappointing house price report. Hot on the heels of yesterday’s Halifax report which showed house prices grew at the slowest rate in almost 5 years. The RICS gauge also unexpectedly dropped to 0, in February, down from 7% in January and below the expectation of 7%. This is yet another clear sign that Brexit uncertainties are clogging up the housing market, with sellers with the option of waiting, doing just that, preferring to see how the market behaves in the near term rather putting their houses up for sale.
ECB in focus
Today’s focus will be on the ECB monetary policy decision and pursuing conference with ECB president Draghi to tweak the forward statement to drop the easing bias, however, this is likely to be balanced out with a very cautious tone from Draghi overall.
We expect there to be growing conflict in the ECB between the hawks, who will consider it high time to bring the quantitative easing programme to a conclusion. Whilst the doves will be focusing on a slow down in momentum in the eurozone economy, inflation at a 14 month low and still a considerable distance from the central bank’s 2% target, a potentially stronger euro versus the dollar as the US is on the brink of kicking off a trade war and that’s all without mentioning the messy conclusion to the Italian elections.
EUR/USD is trading slightly weaker heading into the meeting. An overall cautious tone could send the pair back towards $1.23. On the upside, a slightly more hawkish Draghi could see the EUR/USD move back up to $1.25.
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