Despite European bourses rebounding on Monday, Wall Street didn’t follow suit. The Dow, S&P and Nasdaq all fell lower again overnight extending heavy losses from the previous week. Tech shares were the epicentre of the losses with Netflix (NASDAQ:NFLX) and Apple (NASDAQ:AAPL) dropping sharply on a slashed price target and fears of upcoming earnings respectively.
Shares in Asia edged higher overnight following a week of heavy losses, although geopolitical tensions with Saudi Arabia kept gains limited. Without a rebound in stocks in the US and whilst the focus of the market remains on the Middle East over the Saudi Arabia incidence the markets will struggle to put in a meaningful move higher. Investors will want to see US shares put in a convincing move higher following its recent higher treasury yield inspired sell off before global equities are in the clear.
Chinese Inflation dips (again)
Chinese inflation at the wholesale level declined for a third straight month in September, raising concerns over domestic demand and the health of the world’s largest economy as US - Sino trade tensions remain elevated.
The dollar vs the yen fell overnight, as risk appetite declined and flows into safe havens increased. The yen then rebounded off the 111.62 low touched overnight and is moving higher in early trade this morning as risk appetite nervously regains some momentum.
Pound Steady As Brexit Optimism Takes A Hit
The pound manged to hold its ground against the weaker dollar in the previous session and overnight. As Theresa May plays for time rather than bulldozing a Brexit treaty through, the pound is in limbo. Important issues remain unresolved in Brexit negotiations and a solution won’t be found before the EU summit in Brussels on Wednesday. The clocks have been pushed back not to just November, but now even to December as the can is once again kicked down the road. There is a growing sense that the Irish border issue won’t be resolved; in the words of the EU Commissioner a no deal Brexit is more likely than ever before.
Despite the lack of clarity, the pound was looking resilient versus the dollar. Brexit developments are expected to remain the key driver of the pound; however, for a few fleeting minutes traders will turn their attention to UK jobs data.
The data is not expected to produce any big surprises. Unemployment is forecast to remain constant in August at 4%. Weekly earnings are expected to remain steady at 2.9% in the 3 months to August. It will take a significant beat to the upside to inject some optimism into the pound. On the other hand, any weakness in the figures could drag on the pound given the downside risks of Brexit already making the pound sensitive.
Opening calls
FTSE to open 2 points higher at 7031
DAX to open 30 points higher at 11644
CAC to open 9 points higher at 5104