Global markets headed southwards on Tuesday as global growth and trade fears returned. Trump threatening tariffs on European products, in addition to the IMF warning over economic growth unnerved investors. Markets across Europe shifted lower and the S&P snapped an 8 day winning streak.
This is the third downgrade from the IMF as trade tensions and Brexit continue to weigh on the outlook for the global economy. The timing couldn’t be worse, unsettling investors just prior to the start of earning season on Wall Street. Expectations for a solid earning season are low at best and fears over global growth seeding in now could see investor lose their nerve a continue to sellout of stocks across the week.
Crude pulls off highs
Crude oil eased back off 5 month highs reached in the previous session. Fears over the health of the global economy are hitting the demand side of the equation. Concerns over tightening supply have driven the price of oil sharply higher in year to date and particularly in April. With continued OPEC production cuts, escalating conflict in Libya and sanctions on Iran and Venezuela supply outages are supporting the price of oil, whilst the demand side has really been taking a backseat. Today’s easing in the price of oil unlikely to be a serious change in direction for oil.
Brexit update
The pound was under pressure, moving steadily lower across Tuesday. With just 3 days to go until the U.K. is due to leave the EU, Theresa May’s position is looking increasingly more desperate. Meetings with Macron and Merkel don’t appear to have gone according to plan with the EU looking increasingly more likely to reject a short extension to Brexit. At these levels the pound is certainly not pricing in a no deal Brexit. However growing anxiety over what will happen next is being reflected in the pound’s movement.
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