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Trade war tensions weigh on stocks

market relief

market relief

Stock markets in Europe are in the red this morning as the trade war fears have been ramped up. 

Overnight, President Trump warned China he might seek to impose more tariffs on $100 billion worth of imports. Dealers are fearful this will result in a full-blown trade war, and equities are feeling the pain. Even though investors are cautious, volatility could remain low until the US releases the non-farm payrolls report at lunchtime. 

Next and Marks and Spencer were downgraded by Citi Group. The investment bank gave a downbeat outlook for the UK retail sector, and it cut its rating to sell for Next, and issued a neutral rating on Marks and Spencer.

Weakness in the copper market on account of the potential trade war uncertainty has put pressure on mining stocks like Rio Tinto, Glencore and BHP Billiton.

At 1.30pm (UK time) the US will announce the non-farm payrolls report, and the consensus is for 190,000, and the unemployment rate is tipped to fall to 4% from 4.1%. On a yearly basis, average earnings are expected to increase by 2.7%. 

The US dollar index climbed to its highest in over a month. The talk of a trade war is boosting the greenback as protectionist policies usually have an inflationary effect. EUR/USD is a touch softer this morning on account of the firmer US dollar. The disappointing German industrial production hit the single currency too. In February, German industrial production dipped by 1.6% while economists were expecting an increase of 0.3%.

We are expecting the Dow Jones to open down 205 points at 24,300, and we are calling the S&P 500 down 20 points at 2642.

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