market relief

Stock markets are broadly lower today as dealers are a little nervous ahead of the G20 summit. 

Europe

Trade talks between the US and China will be the main event of the gathering, and investors are likely to remain a little cautious until some clarity is provided.

Overnight, China released the manufacturing PMI report for November, and the reading was 50.0, while economists were expecting 50.2, and the reading in October was 50.2. The update was the lowest reading in over two years, and it represents zero growth on the month. The second-largest economy in the world is a major importer of minerals, and that is why we have seen a large drop in mining stocks today. BHP Billiton, Rio Tinto and Glencore are all in the red.

Continued weakness in the underlying oil market has weighed on the price of BP, Royal Dutch Shell and Tullow Oil.

Sage shares are in the red after the company was downgraded to ‘neutral’ from ‘buy’.

Intu properties shares are lower again today after the group announced disposals of £25.3 million. Yesterday, the company confirmed that a consortium who were interested in acquiring the company, pulled their bid, and that triggered a severe sell-off in the stock. 

Deutsche Bank shares hit another record-low as police raided offices at the bank for a second day in a row. The police search is in relation to the ‘Panama Papers’ and the German bank are under suspicion of assisting clients transfer money to the tax haven.

US

The G20 summit is in focus and some dealers are sitting on their hands until they hear about US-China trade relations. The talks between the two countries will be the highlight to the event. Donald Trump is being accompanied by Peter Navarro, who is very critical of China, so expectations have been tempered going into this meeting. The likelihood of a deal being reached this weekend is low, but if things go well we might see the US holding off from implementing new tariffs. The major indices are mixed and experiencing low volatility.

President Trump, along with Canada’s Justin Trudeau and Mexico’s Enrique Pena Nieto, signed the United States, Mexico Canada (USMCA) deal – which replaced NAFTA. The respective parliaments must back the agreement, but it appears the trade issue in North America is going to be settled.

The Chicago PMI reading jumped to 66.4 – its highest reading in nearly one year.

FX

The US dollar index has crept up today as the Fed minutes last night gave a strong indication there will be an interest rate hike in December. The language from the US central bank is less hawkish than what it was in nearly October, but we are still likely to see rate hikes in 2019, but it might be done at a slower pace.

GBP/USD is lower on account of the firmer US and uncertainty surround Brexit. There is little support for Theresa May’s deal, some MP’s are fearful of a ‘no-deal’ Brexit and now, Donald Tusk, the President of the European Council said its ‘no deal or no Brexit’. The pressure is mounting on Mrs May, and the pound.

EUR/USD has fallen due to disappointing data from the eurozone. Italian unemployment jumped to 10.6% in October, up from 10.3% in September. Third-quarter Italian GDP contracted by 0.1%. Italy is in the middle of a political battle with the EU over their budget, and a deteriorating economy might embolden the anti-establishment coalition in Rome. Eurozone CPI cooled from 2.2% to 2% - meeting forecasts, and this shows that demand is clearly cooling in the currency bloc. 

Commodities

The strong US dollar has hit the gold market. Throughout this year there has been a strong inverse relationship between the metal and the US dollar, and that is playing out again today. Gold has been trading sideways for the last few weeks, but if it holds above the $1,200 mark, its outlook should remain positive.

Oil is in the red again as fear of oversupply persist. During yesterday’s session the energy received a boost from Russia, who indicated they are considering a production cut. Since the upward move didn’t last long, it highlights the weak sentiment. 

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