Risk aversion remains, dragging stocks lower

Risk assets remain out of favour, as the threat of a conflict with Korea pushes traders towards havens. Meanwhile, the UK economy is back in focus, with the trade deficit plummeting despite a weak pound.

• Stocks slump amid risk-off continuation

• Havens remain in favour for now

• UK trade deficit plummets to £4.5bn

European indices are following their Asian counterparts lower once more today, as the risk aversion seen over the past two days continues apace. The potential for a conflict between North Korea and the US seems to be an ongoing threat to risk appetite which will likely flare up every once in a while. For now, tensions are high, yet in all likeliness we will see this intensity simmer down somewhat, with both sides standing to lose more than they would gain from military action. That being said, as long as the likes of Trump and Kim Jong Un continue their recent commentary, we are likely to see the likes of gold, JPY and treasuries in favour.

The pound has been in focus this morning, with early losses rebounding after a stronger than expected industrial production figure for June. However, despite the expectation that a weak pound would help UK exporters to the detriment of imported goods, we have seen the UK trade deficit almost double from £2.5bn to £4.5bn. Worryingly, this is the largest deficit seen in the UK since September 2016, with much of the deterioration thanks to a 4.9% slump in goods export volumes.

Ahead of the open we expect the Dow Jones to open 51 points lower, at 21,998.