Trade war fears were responsible for yet another losing session on the Dow overnight, much as they were responsible for losses around the globe. Yet for the Dow, this marked its eighth consecutive loss and whilst the losses themselves haven’t actually been that large, totalling around 3.5%, it’s the consistency of the losses which is slightly more alarming. The last time the Dow experienced a longer bear run was some 34 years ago, highlighting the usual nature of the market movement that we are seeing. Following the sell off on Wall Street, Asian markets saw mixed fortunes overnight, which is expected to spread to the European open where the FTSE pushing higher on the open, whilst the Dax I on the backfoot.
Keeping trade wars firmly in the limelight, the EU is set to implement its trade retaliation tomorrow with the start of levies on €2.8 billion worth of US imports, which Trump is unlikely to accept lying down. At the least we can expect a tweet, if not a fuller response from the US President, much in the same way he did with China, with a tit – for tat comeback not completely out of the realms of possibility.
PMIs Draw Attention Back to Calendar
Dollar weakness as trade war fears persisted enable the euro to rebound in the previous session, picking itself up from one-year lows. However, the rally has stalled around $1.16 as investors look ahead to PMI data this morning. Eurozone growth continues to experience a slowdown in momentum. Eurozone PMIs across the board are expected to reflect this slowdown in June, as they fall again compared to the previous month. Weaker than forecast PMI prints, combined with a Dovish Draghi at Sintra could prove too much for the euro, particularly if the US PMIs give reason to cheer, $1.15 could once again be a reality heading into the weekend.
Given that the US PMI’s have recently be climbing higher, a surprise to the upside is a real possibility which could jolt the dollar bulls back into life after the buck moved lower on Thursday.
Oil 1% Higher Heading Ahead of OPEC Meeting
Oil was trading 1% higher as investors looked ahead to the start of the OPEC plus meeting in Vienna. Expectations across the week have been that that producers will ease production cuts with the consensus increase now at 1 million bpd. However, Saudi Arabia and Russia, both strong supporters of the easing are being met with strong opposition from Iran, which is creating some uncertainty over whether a consensus can be achieved. The markets are aware that different countries have different requirements and different agendas, meaning a consensus at the meeting will be a challenge, uncertainty is prevailing right now which is lifting the price of oil over 1%. Should no agreement be reached, although unlikely, the piece of oil would lift. Should a gentle cut be agreed we expect oil to remain steady, with a large easing of production cuts leading to a sell off.
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