European stocks have surprisingly managed to shake off a weak close on Wall Street Wednesday where indices dropped to their lowest level in ten weeks on a heady mixture of trade war worries and growing concerns over the state of the US economy.
This morning the FTSE is nudging higher mainly thanks to banking and insurance stocks but slightly higher oil prices are also adding to the rally, helping oil majors and mining stocks.
National Grid (LON:NG) is among the most fragile stocks, with investors pulling out because of fears that the company - alongside other utilities - could end up being renationalised if there is a shift in the UK political landscape that results with Jeremy Corbyn in Downing Street.
Sterling blips higher
The pound nudged higher on the prospect of Labour backing a second referendum but early trade in the currency market has been fairly lacklustre, with an unconvincing move higher by 0.5% against the dollar and the euro. There is a trickle of news on the Brexit front but none decisive enough to move the market possibly until the Conservative Party leadership contest which will heat up when Theresa May steps down at the end of next week.
German bonds rally on trade tensions
European bond markets are benefiting from the ongoing trade war tensions which are increasingly pushing investors towards safe haven assets. China has wielded the threat of restricting its rare earth minerals exports to the US which could not only raise the cost of production for US producers depending on the raw materials but also seriously hamper some of their operations.
German bonds are attracting the most attention and yields on German debt have slipped close to record lows. Surprisingly gold prices are not attracting much of the disillusioned equity traffic and in fact gold prices have mostly traded lower since the middle of the month.
Oil prices have also nudged higher overnight but remain at their weakest level in weeks as the market tries to gauge the influence of the trade dispute versus ongoing tightness in supplies.
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