Stock markets dropped yesterday as concerns over the trade situation and another downgrade of global growth expectations hit markets. The US administration advised that it could hit the EU with more tariffs in the near future and the IMF cut it’s world GDP forecast again for 2019, down to 3.3% from its predicted 3.5% in January. Stocks and risk trades were significantly down on the day with the US indices closing out trading well in the red, the Dow leading the way suffering a loss of 0.72% followed closely by the S&P and Nasdaq, down 0.61% and 0.56% respectively. The dollar had a mixed day as it gained against some of the risk currencies but lost against the havens with the Dxy trading around 97.00 on the Asian open. Commodities were relatively stable with Oil still trading near recent highs and Gold climbing in the risk averse environment.
The threat of further tariffs on the EU from the US will not sit well with global investor sentiment, with Europe struggling on a number of fronts and the IMF downgrading it’s European growth forecasts from 1.6% to 1.3% for the year, the added burden of further tariffs could push conditions in some member states further south. The Euro has rallied off of it’s recent lows but is still within striking distance of downside support and if we do get a more dovish ECB message later tonight after their latest meeting without some significant stimulus attached then the single currency could crash through those levels and target 1.100 within a couple of sessions. To add to that mix, the Brexit deadline is only two days away with the situation still looking unclear, Theresa May is set to talk with EU leaders and any change to current expectations of a short term extension to that deadline could lead to further volatility across both UK and European markets.
Looking ahead to the rest of today’s trading sessions and Australia will come into focus early in the Asian session, Consumer Confidence numbers are due out early in the day followed by a speech from RBA Assistance Governor Guy Debelle. Into the London session and the UK comes into focus early with the release of the latest GDP and Manufacturing Production numbers, investors will then look to the continent and the aforementioned ECB meeting as well as any updates with regard to Brexit. It’s a relatively quiet day in terms of economic data releases in the US session but expect trade comments to continue to influence sentiment.