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Mixed start for Europe as UK monthly GDP beats expectations

A mixed open for markets in Europe as investors absorbed the latest Chinese trade data for August and Friday’s sharp jump in US wages to 2.9%, matching the levels last seen at the beginning of this year.

Another Trump tweet appears to have hit the Asia stocks after President Trump aimed a broadside at Apple, saying that they should shift overseas production back to the US to avoid possible China tariffs, as well as price increases. This saw several Asia based technology stocks and Apple supply chain providers undergo heavy falls.

China’s latest trade numbers saw the overall surplus narrow to $27.9bn, as exports fell back to 9.8%, however its trade surplus with the US moved in the opposite direction jumping to a new record high of $31.5bn, in a move that is only likely to reinforce the sense of grievance US President Trump has with China, and its trade practices.

Tensions were already high after data last week showed that the US deficit with China rose to a record high in July, a trend that looks set to continue when the latest US numbers for August are released next month.

Last year the total value of Chinese imports to the US was $507bn and with tariffs already imposed on $50bn of that the US appears to be mulling the prospect of tariffs on the remaining $457bn starting with an initial $200bn which could be set to go in the coming days.

Against that backdrop it is hard to imagine that the US economy won’t at some point see some trickledown effect into prices over the coming months, but for now that doesn’t appear to be the case, while Fridays US wages numbers reinforced the prospect of another two US rate rises this year, coming in at 2.9%, and matching the highest levels seen in the last ten years.

The divergence between US and European markets came to an end last week with the NASDAQ recording its worst start to September since 2008 as investors started to take some profit after a decent run of gains and new record highs for the S&P500 and NASDAQ, as both indices posted heavy weekly losses.

On the companies front Primark owner Associated British Foods reaffirmed its full year guidance as it said that it expected to report a rise in full year like for like sales of 1.5% with UK stores helping drive the move higher. While the retail business continues to show good growth the sugar business has remained a drag on its overall performance. Lower sugar prices appear to affecting output with the company warning that revenue and profit will be materially lower than the previous year.

The retail sector has continued to feel the chill wind of changing consumer spending habits, with Debenhams share price under pressure once more, on reports that the struggling business is embarking on yet another attempt to turn the business around, appointing KPMG to look at measures to shore up its finances.

Rising trade concerns have been blamed on the decision by Geely, the Chinese owner of Volvo cars to delay its IPO, over concerns that the initial float would see the shares slide lower, over concerns about the implementation of US tariffs on European cars. These same trade concerns are also weighing on the basic resource sector today with Glencore and Antofagasta both lower on the day.

The pound is set for another important week after undergoing a bit of a rebound in the past week or so, as a slightly more conciliatory tone from the EU, along with fairly decent economic data has helped limit some of the damage after some heavy falls.

Today’s latest industrial and manufacturing production data for July showed that the sector had a disappointing start to Q3, rising 0.1% and declining 0.2% respectively. The latest GDP numbers were slightly more encouraging with the May to July numbers showing an expansion of 0.6%, while July on its own recorded a 0.3% expansion, well above expectations of 0.1% with the services and construction sector helping drive a lot of the improvement.

US markets look set for a modest rebound on the open after last week’s sell-off, despite the ratcheting up of trade tensions by the President Trump over the weekend. In a sign that Chinese authorities are taking steps to protect their exporters the Ministry of Finance announced that it will rebate some duties on certain items from the 15th September.

Apples share price is expected to be in focus after President Trump’s tweets at the weekend saw some late weakness, and ahead of this week’s product launch of new Apple products.

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