Though it has felt like a weirdly aimless week, it seems the markets have settled on a direction – and it’s not up.
In a fairly predictable, if no less troublesome, move, Beijing ordered the closure of the US consulate in Chengdu, as retaliation for the Trump administration shuttering the Chinese consulate in Houston.
The fear is that this might only be the start of a re-escalation in tensions between the two superpowers, especially as Trump seeks to distract from his disastrous domestic policies in the run-up to November’s Presidential election.
China has said that it ‘does not want to see’ the current situation, and that the ‘responsibility rests entirely with the United States’ regarding what happens next. Which, given the leadership stateside, has provided no comfort to investors at all.
Mix in the news that US covid-19 cases have now crossed the 4 million mark, and Friday’s European data got lost in the wash.
The FTSE sank more than 100 points, plunging back to 6100 and nearing levels last seen a fortnight ago. This as a strong retail sales beat in June – at 13.9% against the 8.3% forecast, with an upwards revision to 12.3% in May – was swept aside in the macro-panic.
One can perhaps assume the same will happen to July’s flash UK PMIs. The manufacturing sector is expected to rise from 50.1 to 52.0, while its services counterpart is looking for a chunkier bounce, from 47.1 to 51.4.
Ignoring a broadly better than forecast set of flash PMIs themselves – with big increases in French and German services – the Eurozone indices were even worse off than the FTSE. The CAC shed 1.9%, sinking back to 4930, with the DAX falling 280 points, dropping from its recent 5-month highs to a 2-week low of 12830.
Already down 350 points last night, the Dow Jones is looking at another 200 point slide after the bell, one that would leave it back at 26450 – like for the FTSE and DAX, that’d be a fortnightly nadir.
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