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Europe is enduring a broad sell-off as investors are fearful we are heading for a global trade war. 

Europe

The US is anticipated to announce plans to restrict Chinese investment in the country. US treasury secretary Steven Mnuchin announced the restrictions will apply to ‘all countries that are trying to steal our technology’, but dealers believe the move is largely aimed at Beijing. 

Countrywide shares have sold off severely on account of the company issuing a profit warning. The estate agent confirmed that first-half profit would be £20 million below last year’s figure, and it would not be recouped in the second half. The company aims to cut its debt position in half by issuing new shares. Countrywide announced that business is picking up, and new listings are up 9% since the end of last year. The stock has been in decline for three years, and if the bearish move continues, it might target 50p.

Oasis Management has called for Gavin Darby to step down as CEO of Premier Foods. The investment firm feels the company has underperformed in recent years. Oasis management blame Mr Darby for the company missing targets and not having a strategy. Premier Foods will hold an annual general meeting next month, and Oasis are driving for shareholders to push him out of the top job.

Porvair shares are higher today after the company posted a solid set of first-half numbers. Revenue rose by 7% and pre-tax profit jumped by 8% The interim dividend was increased by 7%, and the company announced that activity levels are healthy. Peel Hunt, a stockbroking firm, upped its price target price for the stock from 580p to 590p.

US

Equities are in the red as President Trump is expected to restrict Chinese investment in the US. Dealers are expecting the announcement to be made during the week.  According to the Rhodium Group, Chinese foreign direct investment in the US has dropped by more than 90% in the first-half of this year compared with the same period last year, and it is likely to fall further.

The US wants to curtail Chinese investment in the technology sector as a way of maintaining its edge over the country. Traders are viewing this as the latest round in the trade war, and US stocks are feeling the pain.

US new home sales in May were 689,000, which easily exceeded the 667,000 that economists were expecting. The April figure was revised down from 662,000 to 646,000. Throughout 2018, US new homes sales have been broadly moving higher.

FX

The US dollar index continues to drift lower again after reaching an 11-month high last week. Dealers are taking their profit on the greenback, but while it holds above 93.4 its outlook might remain positive. The Federal Reserve could raise rates two more times this year, depending on the trade situation, so this pullback might attract fresh buyers.

EUR/USD is taking advantage of the soft US dollar. The euro is higher despite the German Ifo business climate report slipping to 101.8 from 102.3 in May. While trade tensions hang over the EU, it is hard to imagine that business confidence will pick up in the near-term.

GBP/USD is slightly higher today. Since there were no major economic announcements from the UK the currency pair has experienced low volatility. Sterling has been in a downtrend versus the US since April, and a move below 1.3102 might bring 1.3000 into play.

Commodities

Gold is in the red despite the weaker US dollar. The metal has been in a downward trend since April, and given that it hit a six-month low last week, the bearish move could last. It is a worrying sign for gold that it can’t attract buyers when global equity markets are tumbling. If gold breaks below $1,261, it could pave the way for $1,250 to be targeted.

WTI and Brent Crude oil have been hit by profit-taking after the oil market surged on Friday. The long-awaited Opec meeting at the end of last week delivered a smaller-than-expected increase in output, which triggered a wave of buying. Today, dealers are locking in their profits. The oil market has enjoyed a bullish run over the past year, and if it can hold above the June lows, the wider upward trend might continue.

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