US and German PMI surveys failed to muster any form of confidence in the growth picture, with stocks and the dollar under pressure today. The UK political picture looks bleak, with the chances of a no-deal Brexit or general election rising with May’s departure. Meanwhile, the US-China trade war looks set to roll on, dragging stocks lower in response.

  • US-China trade war continues to dent market confidence
  • Pound declines likely to continue as May’s impending departure raises likeliness of no-deal Brexit or general election
  • US and German economy under pressure, as PMI surveys tumble

European and US stockmarkets have followed their Asian counterparts lower today, as the continued anxiety over US-China trade relations hurt sentiment. While China today called for US sincerity, the fact is that this recent breakdown in relations appears to be something that comes from both sides. The US targeting of Huawei is unlikely to be the end of it, and the more ties are severed, the more Chinese and US firms will readjust to a norm which does not include one another. The Chinese are buying Russian soyabeans, Hauwei is developing its own operating system to replace Android, and those firms that don’t have the capacity to find new suppliers or customers will simply have to suffer.

The UK political picture looks anything but strong and stable right now, with a lame duck prime minister seemingly holding on by her fingertips. Whether she gets to see a fourth and final vote remains to be seen, but the outcome is likely to be the same in either case. With May out the way, markets face the prospect of more upheaval, with sterling traders keeping an eye out for exactly who will take the reins. The bookies favourite Boris Johnson may appeal for some, yet for markets the prospect of a bumbling Brexiteer does not look enticing. The chances of no-deal Brexit or a general election both rise with May’s resignation, and looking at the pound this week, markets certainly know that. 

The European and US growth picture took a dive today, as a host of PMI surveys pointed towards a clear slowdown in May. The big worry in Europe comes from Germany, with the manufacturing PMI figure of 47.7 signalling a fourth consecutive month of contraction. Previously the driving force of eurozone growth and prosperity, we are now seeing growth come from elsewhere, with the industrial giant spluttering along in the face of continued global growth concerns. Unfortunately for dollar bulls, the US followed the German lead today, with both services and manufacturing PMI surveys coming out at worrying levels. Today’s 116-month low for the US manufacturing PMI is a huge concern for exporters, with Donald Trump’s ongoing trade war with the US clearly denting growth prospects despite his claims of incredible outperformance. However, the simultaneous decline in services growth is particularly worrying, this signals an economy which is under pressure from all sides. Yesterday may have seen the FOMC take a more patient approach, yet the sharp deterioration in US PMIs will surely start to grab the attention of Fed members if is translates into weaker growth data in the months to come. 

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