The FTSE 100 has reversed early gains, as a resurgent pound comes at the expense of UK stocks. Meanwhile, growth fears have resurfaced, with declining US PMI data putting pressure on Powell. 

•       Merkel boosts pound, to the detriment of UK stocks
•       US growth concerns return, putting pressure on Powell
•       ECB minutes hint at expansionary plan, yet uneven slowdown highlights role of fiscal easing

Stock market gains have faded into the close today, with a sharp rise in sterling driving the FTSE 100 lower once again. Today has provided the first glimmer of hope that the UK could yet find agreement with the EU in a bid to avert a no-deal Brexit. Merkel’s more open stance on the backstop stands in stark contract to the likes of Macron and many from the EU hierarchy. Thus while this boosts sentiment for now, the fact that Johnson needs all 27 EU nations onboard means that very little has changed in reality. One notable area of progress comes from the fact that talks are even taking place, with Macron’s promise to continue exchanges throughout September pointing towards potential  developments in the month ahead.

Global growth concerns are back in play today, with US manufacturing contracting for the first time since 2009. Coming off the back of another contractionary German manufacturing PMI reading (43.6), it is clear that the US trade policies are hugely detrimental to global trade and sales of manufactured goods. While Trump continues to criticise the Fed, today’s sharp decline in both services and manufacturing PMI surveys will arguably put more pressure on Jerome Powell who is due to speak at Jackson Hole tomorrow. 

With that economic slowdown coming to a head over recent months, it should come as no surprise to see the ECB cite growth concerns as the main reason behind a potential raft of easing measures in the months ahead. With negative interest rates already in place, the ECB will instead look towards quantitative easing as a policy to help counteract the eurozone slowdown that is heavily affecting exporters such as Germany. However, with French PMIs on the rise, the eurozone slowdown is clearly uneven in nature, highlighting the need for regional fiscal expansion in those countries particularly affected by global trade headwinds. 

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