Trade concerns, Brexit keep markets under pressure

The FTSE is weaker at the start of the week, reacting to renewed worries about the US-China trade negotiations which seem to have stalled again. The London gauge ignored a modestly higher closure on Wall Street Friday brought on by relatively strong US employment data as investors instead focused on comments from the leader of China’s trade delegation saying China is no longer willing to discuss certain issues brought up by the US.

HSBC’s decision to slash and dash, that is, to cut 10,000 jobs in order to reduce costs and help prop up share prices, did not have quite the desired effect as early trade shaved off more than 1% of the share price. It is not so much that the move would not be effective in cutting costs but because there are only a few banks as exposed to current global flashpoints as HSBC is, with the US-China trade dispute, Brexit and Hong Kong protests all affecting its core markets.

German manufacturing trips up euro

The euro is a fraction weaker against the dollar after German data showed that the country’s manufacturing orders shrank again in August bringing the overall annual decline to 6.7%. The numbers also increased the likelihood that the next set of German GDP data due out in November will show that the local economy has gone into recession. The numbers for the second quarter had already registered a 0.1% contraction, but this is not yet ominous enough, as this is seasonally typically the weakest quarters in the country’s annual cycle. But if the numbers are replicated in the third quarter it will confirm the ECB’s concerns over the overall state of Europe’s largest economy, which is bearing the brunt of US import tariffs on European cars and lower demand from China.

However, the euro is slightly stronger against the pound, courtesy of the unresolved Brexit talks. Brexit negotiations are entering a crucial week at the end of which EU negotiators will assess if an agreement with the UK is possible or not. The PM is sending both encouraging and threatening signals to Brussels, indicating that he would be willing to make concessions on his Brexit plan, but also saying that this is the final opportunity to secure a withdrawal agreement. However, neither of those are providing the markets with any clarity about the next step or any reassurance, and the pound slipped to 1.2311 against the dollar. Trading remains in a relatively narrow range as investors brace themselves for more volatility in the week ahead.