Chinese exports slide, further denting confidence

Concerns over Chinese trade talks with the US have been highlighted by weaker export data, with Asian markets losing ground in response. Meanwhile, the pound is sliding as hopes for a near-term Brexit solution fade.

• Chinese exports suffer, helping maintain bearish sentiment

• GBP slips as UK heads towards European elections

• German industrial production beats fail to mask continued problems

Chinese concerns are once again the main driver of bearish sentiment for global markets, with disappointing trade data piling on the pressure amid faltering trade talks with the US. The Chinese Yuan has been a key barometer of market confidence in the pathway of the Chinese economy, and with thus it comes as no surprise to see USDCNH turning higher once more as a result of this latest setback for Asia’s biggest country. With much of the trade deal boost already factored in, we are seeing that unravel as China's Liu He and US's Lighthizer are allowed just a few hours to somehow resolve a situation which looks likely to end with an escalation of tariffs between the two economic giants.

The pound has slipped in early trade, with optimism over cross-party Brexit talks fading amid substantial criticism over the customs union plans that appear to form the backbone of any agreement between May and Corbyn. Ultimately such an agreement would limit the UK’s ability to form unilateral trade deals and will face a substantial pushback should such a deal reach parliament. David Lidington has stated that the UK will likely have to hold European elections on 23 May, knocking back any idea that we could see an agreement before that date.

This morning’s Germany industrial production figures provided a rare boost for the European exporting giant, with a 0.5% rise in March providing the highest growth rate in ten months. Unfortunately, that in itself is a damning statistic for a country which has used its industrial sector to drive employment and GDP growth for years gone by. This week’s EU forecasts point towards Germany being the second slowest growing nation of 28 over the course of 2019. While there is positivity to be taken from the fact that we have now seen the first consecutive months of industrial output growth in over two years, any such growth is likely to be muted until we see the global trading picture return to
normal.

Ahead of the open we expect the Dow Jones to open 19 points higher, at 25,984.