Weak Chinese trade data hurts market sentiment

A sharp drop in Chinese trade has seen markets kick off the week in bearish fashion. Meanwhile, huge uncertainty in the face of tomorrow’s Brexit vote is seeing the pound drift lower in early trade.

• European markets falter amid weak Chinese trade data

• Growing China-US trade surplus does little to help trade talks

• UK markets dominated by huge Brexit uncertainty

European markets have started off the week in somewhat downbeat fashion, following on from a similarly bearish session overnight in Asia. The release of Chinese trade data has done little to help sentiment around both the Chinese growth story, and prospects of talks between the US and China. A sharp deterioration in both export and imports highlights the kickback following a period of front-loading of Chinese exports, which have now fell the most in two-years. Softness for US firms reliant upon Chinese demand will likely continue as we see the impact that this trade war has had upon spending habits in the world’s second-largest country. Unfortunately for US-China trade talks, today has seen the Chinese trade surplus with the US grow to the largest since records began in 2006. Trump’s notion that a trade war would hurt China more than the US appears not to be playing out as of yet, with the yuan devaluation helping to shift the landscape in favour of China.

The pound is starting to drift lower at the start of the week, with traders looking increasingly uncertain about what the future has in store for the UK economy. Brexit has rarely felt so up in the air, with a likely rejection of May’s Brexit plan leading us into a period of great unknown. It is difficult to see how Theresa May is going to shift from adamantly stating that this is the only deal possible, to proposing a new direction within three days. As a no-deal Brexit becomes less likely, the likelihood for a ‘people’s vote’ is growing which is part of what is helping drive the bullishness seen throughout the start of 2019.

Ahead of the open we expect the Dow Jones to open 214 points lower, at 23,782.