Markets update October 8th 2019

Markets update

Summary

Asia stocks edged higher. Japan’s Nikkei closed up at: 21588. But pressure on U.S. markets as futures show Dow to open down by some 200 points.

Brexit

Report released today suggests a Brexit ‘no-deal’ could see UK government borrowing hit a 50 year high to as much as 90% of national income or Gross Domestic Product (GDP). As a figure that could be as much as £100 billion! So, after all those years of austerity the UK still may not have ‘balance’ the books, and that’s worrying.

The UK government has published a ‘Brexit readiness report’ to advise businesses and the general public on what they need to do to get ready for leaving the EU on 31st October.

FTSE 100 & Sterling fall

The FTSE 100 is back in negative territory – this, despite a sharp fall in the pound following reports that a Brexit deal is now ‘essentially impossible’.

U.S.

Markets waiting for U.S. – China trade talks to resume.

Markets in wait and see mode as U.S. – China due to resume this week, although Dow futures are down around 200 points at 14:25 BST.

U.S. and Japan sign trade deal.

U.S. producer price index fell 0.3% in September vs expected 0.1% increase.

U.S President impeachment inquiry gathers pace. It is reported, in the U.S. media, that polls appear to suggest this is becoming a rising threat to Donald Trump.

Dow down at open

U.S. stocks dropped 200 points at the open, as a report suggested the Trump administration was considering possible restrictions on capital flows into China – this provoked more concerns about the outcome of trade talks due to re-start on Thursday.

U.S. – China trade talks to resume

China has already indicated that certain issues are not on the table for discussion – such as state subsidies for instance. So far the U.S. has not made any obvious direct comment about this – so just maybe President Trump will be looking at this differently this time. Maybe he will suggest solving the tariff and trade issues first and deal with the more difficult political issues later?

Let’s face it – trade wars and tariffs are unlikely to fix the deep rooted concerns the U.S. has over China trading imbalances? This may take years to resolve.

Just the smallest glimpse of a positive outcome from these latest talks will pave the way for more negotiations and keep the markets happy, for now at least.

But I fear the recent ratcheting up of rhetoric from both sides have created even more market uncertainty. China is requesting the U.S. stay out of internal politics and to remove Chinese businesses placed on a U.S. trade blacklist. Is the U.S. throwing obstacles in the way as part of a negotiating tactic?

And then there’s the escalating tension in Hong Kong.

I am amazed these talks are still going ahead at all…

IMF

International Monetary Fund – (IMF) – warns of ‘synchronised slowdown’ in global economic growth and of a looming Brexit disaster. No surprises there then!