Uncertainty over key issues keeps markets without clear direction

European indices are flirting with the flat line after Wall Street closed lower and most Asian markets also declined. But Chinese stocks were surprisingly resilient in the face of slightly lower than expected domestic GDP numbers and though they initially dipped the Shanghai Composite closed up 2.58%.

The relapse in US bonds is setting a nervous tone for the day leaving all markets a bit vague on direction. The Fed made it clear that despite President Trump’s objections it will continue to steer a hawkish course, raising rates as planned. This combined with the ongoing US-China frictions is keeping the money markets on their toes and spilling into the stock markets too.  

Italian budget and Brexit concerns continue

In Europe the simmering issue over the Italian budget has the potential to disrupt money market trading and markets are beginning to price in the possibility the ECB will postpone its planned September 2019 rate hike for later next year. Things will come to a crux next week when the EU reviews Italy’s draft budget and gives its official yea or nay.

In good news for the UK market the EU’s Brexit Commissioner Michel Barnier came out with positive comments that the Brexit deal is 90% in place but when reading the fine print it became clear that this may have been said just to placate the markets. For the time being currency investors are taking Barnier with a pinch of salt and the pound is barely shifting against the euro and the dollar. The greenback is also slightly directionless following Thursday’s Fed minutes.  

Brent crude below $80

After weeks of Iran sanctions-induced frenzy Brent crude is trading back below $80. The Saudi-US tensions have fizzled out as both sides have stepped away from a trade conflict and US domestic stock data is indicating good supply levels at home. The declining oil prices won’t bode well for oil companies’ shares and though they are holding their ground for the moment they could come under pressure in the course of the day.