Global stock markets had a tough day yesterday as fears that a deal between China and the US won’t be coming anytime soon continued to weigh on sentiment. President Trump now advising that a meeting with President Xi of China is highly unlikely before March 1. The majority of the worlds major stock indices finished their days down with the European markets probably the hardest hit, the US day finished with the three major bourses all dropping close to 1%, the tech sector once again be pushed the hardest. The dollar maintained its recent drive higher, the Dxy trading now at 96.60, close to monthly highs. The pound took a tumble as the BOE cut it’s growth forecast but sharply corrected on short covering as Governor Mark Carney advised that markets should keep the chance of further rate hikes on the table. On the Brexit front, little progress was made by PM Theresa May in Brussels with the EU still standing firm on their position that they do not wish to renegotiate the original deal.
Clearly geo-political concerns are still dominating market sentiment and as the uncertainty over several issues drags on markets will continue to trade in a defensive manner. The UK joined the long list of countries revising their growth forecasts lower yesterday and investors will be expecting more downward revisions until we get greater clarity over trade and the dominant issues in the market. There could be some light at the end of the tunnel next week though as Asian markets return from their holiday and US officials visit Beijing. There has been a significant change of rhetoric from the US side in the last couple of days as their initial bullishness after the last meeting has turned more cautious and a sensitive market has reacted to this. Investors will be hoping for more concrete and positive details from both sides as the negotiations recommence next week.
Asian markets are set for a negative start to what will probably be another subdued day with the Lunar New Year holidays still keeping many centres closed. There are a couple of risk events ahead for traders in Asia with the Japanese Average Cash Earnings due out in Tokyo and the RBA Monetary Policy Statement in Sydney, also we’re set to hear from FOMC member Bullard during the session. There’s little in the way of data in the European time zone but the focus will move to Canada on the New York open with the latest Employment Data due from Ottawa.