European stocks follow Asia lower
|European markets are declining in the wake of a pessimistic tone from Trump in regards to US-China relations. Meanwhile, a decline in UK inflation has taken the pressure off Mark Carney, who now has greater room to manoeuvre.
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Trump comments provide little reason for optimism
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UK inflation drops to 1.5%
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Powell in focus after positive payrolls release
European markets are following their Asian markets sharply lower today, following somewhat disappointing comments from Donald Trump yesterday. Trump’s appearance at the Economic Club of New York was hoped would provide markets with a boost, yet he instead chose to warn of the threat that tariffs would be ramped up again if no deal were struck with China. Elsewhere, the NZD rose sharply overnight, with the RBNZ opting against cutting interest rates despite widespread expectations of such a move. To a large extent this appears to be a reflection of growing hope that we could see a US-China trade deal, with recent optimism apparently impacting central banks alongside the markets.
UK inflation took the pressure off Mark Carney and co today, with the 0.2% decline bringing the year-on-year figure to a three-year low of 1.5%. Easing inflation is good news for the most part, raising the gap between inflation and wages to increase real income. This will also provide good news for Mark Carney, as the lower rates does provide a degree of flexibility to enact a more accommodative monetary policy mix in response to future economic weakness. However, for the most part the BoE are likely to remain neutral until we break through the current political and economic deadlock.
The Fed comes back into focus today, with Jerome Powell expected to provide a somewhat upbeat assessment despite Trump’s calls for lower rates. The Fed’s recent period of easing has come to an end, and with the US jobs report largely outperforming, there is a strong chance we will see Powell push the dollar higher with a relatively optimistic outlook.
Ahead of the open we expect the Dow Jones to open 107 points lower, at 27,584.
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