Despite briefly spiking above 7600, the FTSE was unable to retain its strength and moved into negative territory towards the end of the session. An escalation of trade tensions between the US and China hit metal prices pulling miners lower, overshadowing a boost to retailers following stronger than forecast CBI sales data.
Even as US and Chinese officials are gathered in Washington for trade talks, in an attempt to ease increasing tensions between the two powers, the White House continued with another round of trade tariffs, this time on $16 billion worth of Chinese imports. China, in response has promised tariffs to match those of the US, essentially pouring cold water over any optimism towards the current talks.
In short, these are not the actions of two sides that are making progress in conciliatory talks, indicating that it is unlikely that this round of trade negotiations is going well.
As optimism fades, and sentiment towards China, the world’s largest metal consumer has been dented, metal prices took a hit with copper falling towards a one year low. As a result, miners are dominating the lower reaches of the FTSE with the likes of Anglo American (LON:AAL) and Fresnillo (LON:FRES) down 1.5%.
Retailers Rally on Encouraging CBI data
Investors cheered encouraging data from the Confederation of British Industry, which reported an unexpected increase in retail sales over the summer. The hot weather ensured that consumers continued to spend across August even after they spent well in July around the World Cup. Several months of strong spending by the UK consumer has sent investors in search of retailers, lifting the likes of Marks and Spencer (LON:MKS) and Primark owner Associated British Foods (LON:ABF). However, the outlook for the sector still remains weak amid Brexit uncertainties, and sluggish wage growth.
Dollar Strong Ahead of Jackson Hole
Despite the encouraging CBI data, the pound tanked lower overcome by Brexit fears, as no deal planning ramps up a gear and the strength of the mighty dollar. The dollar bound higher across the board, boosted by the Fed’s hawkish minutes in the previous session, which showed continued support for hiking interest rates.
Investors will now look ahead to Jerome Powell’s Jackson Hole speech tomorrow on 'Monetary policy in a changing economy'. Investors will pay close attention to any comments signalling the future path of monetary tightening. Whilst there has been a lot of drama in recent weeks with the Turkish lira crisis, Trump political issues and escalating trade tension, for Jerome Powell not much has changed; the US economy remains strong at 4.3% GDP in Q3, inflation is on target and unemployment below 4%. Add into the mix a fresh record high for the S&P 500 and further fiscal stimulus in H2 and conditions are ripe for further stimulus.
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