Stocks Dive As Optimism Of U.S.–Sino Trade Deal Fades
The selloff in global stocks continued on Thursday amid growing fears of an escalation in the US – Sino trade dispute. As the clock ticked down to the deadline for US and China to raise reciprocal tariffs, indices across Europe plummeted.
Fear and risk aversion are driving a sharp selloff in equities. The big concern for investors is what impact will the increased tariffs and prolonged trade dispute have on the global economy. Just as we are starting to see tentative signs of global growth stabilising, Trump’s actions could put that into reverse. Should the tariff increase take place, I think it’s safe to say that the current selloff in equities will continue.
Euro Stoxx 50 tumbled 1.2% led by automakers, whilst the DAX, which is particularly sensitive to trade developments shed over 1.5%. Wall Street opened in the red dropping over 1% in the first 30 minutes of trading.
The FTSE was holding up better than its European counterparts, down 0.5% thanks in part to the weaker pound and buoyant housebuilder, one of the few sectors to advance on Thursday.
Housebulders rally as house prices jump in April
House builders dominated the upper reaches of the FTSE after the Halifax housing index showed that UK house prices for April posted the biggest jump for two years. House prices were up an impressive 5% year on year in the three months to April, better than the 4.5% increase forecast and an improvement on the 2.6% increase recorded in March. Whilst on the face of it this looks like great news, it is worth remembering that the Halifax house price index tends to be volatile, its results so far this year have been unusual at best.
Other housing market indicators are not painting quite the same rosy picture. It would be too soon to say that he housing market was staging a recovery. Still, investors were happy to run house builders higher on the news.
Pound falls below $1.30
After an early move higher, the pound proved unable to keep its head above the key psychological level of $1.30 as it came under selling pressure for the fourth straight session. Losses this week versus the dollar are nearing 1.5%.
Pound traders are clearly not convinced that Theresa May bringing her Brexit Agreement back to Parliament for a fourth vote, in a desperate bid to avoid European Parliamentary elections will be successful. With no accord with Labour and her own party desperate to push her out, Theresa May’s options are very limited. The overriding fear for the pound is should this strategy fail, and the Conservatives oust their PM, which hard-line Brexiter will take her place?