US stock markets had a tough day in thin liquidity yesterday with tech stocks once again taking the brunt of the pain after Apple suppliers reported weak demand, the Nasdaq finished the day 2.78% down and the Dow and S&P weren’t too far behind. The dollar continued to drive higher against the majors with the Euro breaking down through the key 1.1300 level to hit fresh lows on the year and Cable remaining under pressure with Brexit concerns still prevalent. It was a similar story in EM’s with the Yuan once again heading towards yearly lows against the greenback and other currencies seeing some sharp corrections of recent strength. Oil continued to slump to lower levels with WTI now trading under $59/b and Brent under $70/b.
We have some key risk events coming up in the next couple of days and investors will be watching closely to see if they can change sentiment. The topside optimism the markets experienced after getting through the US midterms relatively unscathed has quickly reverted back to concern over trade issues between the US and China and the affect that tariffs and protectionist policies have had on overall global growth. In Europe the focus will remain on the relationship between the EU and Italy as well as the Brexit situation with the UK, further uncertainty will continue to pressure the single currency. Chinese data tomorrow will be a major focus for analysts looking at tariff impact and this is then followed up by CPI data out of both the UK and US.
Looking at today’s trading sessions and Asian markets look set to start the day down in the red zone on the back of the tough US session, Australian traders will be keeping a close eye on the Business Confidence data this morning, although expect overall sentiment to dominate moves. In the European session traders will continue to monitor the ongoing geo-political situations that are influencing moves at the moment but UK data in the form of Employment and Earnings numbers will become a focus as London opens up. It’s relatively quiet in terms of data releases through the US day but we are set to hear from FOMC member Brainard later in the day.