The FTSE started the week in a more downbeat mode as Brexit negotiations failed to make any progress over the weekend and Chinese data starkly showed how much damage the Sino-US tariff war is doing to the country's trade. Chinese imports have now been shrinking for five months and the September data showed a deeper contraction than in previous months. Similarly, exports have also been affected with data indicating that the effect of the tariffs is beginning to accumulate.

Although the US and China made some progress late last week and President Trump suspended tariffs due to come in in mid-October, the damage from the existing trade restrictions is being felt. US stock markets are also bracing themselves for the latest US reporting season due to start this week which will also show how much the trade conflict bruised and battered US companies, particularly technology firms with strong Asian exposure.

 

Sterling drops as talks reach deadlock

The pound has dropped like a stone overnight after Brexit negotiations didn't lead to any significant progress over the weekend. Sterling had bounced to levels not seen since the beginning of the year after Boris Johnson and his Irish counterpart indicated that they might have a solution to the Brexit deadlock. However, hopes of a resolution were dashed after EU negotiators commented that they are not getting even into the ballpark area of where they would like to be with negotiations. This gives Boris Johnson only one more week to pull the rabbit out of the hat. By October 19 MPs will have to vote on whether to delay Brexit or not and at this stage there seems to be no prospect of a peaceful resolution. The pound has in the meantime slipped back to 1.2565.

 

Oil slides on weak Chinese data

With the situation in the Gulf seemingly quiet for the moment the oil market's focus has turned back to the slowing global demand, and Chinese data early this morning provided no encouragement in that respect. Prices are coasting along the $60 level but activity is fairly unconvincing.

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