Soft European data sinks stocks

There’s been a clear move lower in European markets with US futures also trading firmly in the red after the latest set of data from the continent provided a timely reminder of the slowdown that has been in effect for quite some time now. The FTSE has fallen by more than 80 points in early trade to move down to its lowest level of the week while the pound is attempting to recoup some of its recent losses, bouncing against both the US dollar and the Euro in recent trade after hitting new 4-month lows vs the buck.

Industry surveys point to subdued activity

With the latest developments on the trade front dominating the headlines in recent weeks it’s easy to overlook the impact that the tariffs already in place are having on global growth. German manufacturing can be seen as a bellwether for the global economy and according to recent industry surveys there are alarm bells ringing with the PMI for May producing a 3rd consecutive sub 45 print.

The last time this metric did this was in the depth of Eurozone debt crisis back in 2012 and with the latest reading coming in worse than expected, it now means that 9 of the past 10 releases have missed forecasts. The German Dax is where this weakness can be most keenly felt with the benchmark dropping back below the 1200 level to trade at its lowest level of the week, but there’s been sizable declines across European bourses and Wall Street is called to open significantly lower this afternoon.

Is May’s time up?

A surprising speech from Theresa May on Tuesday, in which the PM seemed willing to sacrifice a significant amount of Tory support in the hope of gaining cross-party votes in order to pass the withdrawal agreement, appears to have been the straw that broke the camel’s back with speculation doing the rounds that she will be gone by the weekend. It is no secret that the PM’s days have been numbered for some time now but this last-ditch attempt to force through her deal and leave with any semblance of a victory has back-fired. What this all means for the markets is a significant increase in the chances of a no-deal Brexit and this has sent the pound steadily lower in recent weeks.

The UK head to the polls today for the EU elections and while the outcome could give a further indication of the electorate’s views on both the government and opposition’s handling of Brexit, the more important result could arguably be those from across Europe. A surge in populist anti-EU MEPs would change the dynamic for future Brexit negotiations and likely serve to further increase the risk of a no-deal that is already looking more probable with May’s successor expected to be more open to leaving in this manner.