Brexit Deal Optimism Fades, U.S.-China Woes Linger; Sterling Drops 

Brexit Deal Optimism Fades, U.S.-China Woes Linger; Sterling Drops 

CMC Markets  | Oct 14, 2019 11:09

Equity markets in Europe are in the red this morning as a combination of Chinese data, renewed woes about Brexit, plus a dip in optimism surrounding the US-China trade situation, have weighed on sentiment. Overnight, Chinese exports and imports dropped by 3.2% and 8.5% respectively, both reports showed declines on the month, in addition to undershooting forecasts. The figures underline the economic slowdown in China. The trade tensions are clearly impacting domestic demand, as well as international demand for Chinese goods. The disappointing imports numbers from China has hurt miners like Glencore (LON:GLEN), Anglo American (LON:AAL) plus BHP Billiton (LON:BHPB).

At the back end of last week, the US-China trade dispute made some progress as a partial deal was reached. China agreed to buy $40 billion-$50 billion worth of US agricultural goods Chinese trade delegates also pledged to address the US’s concerns about financial services plus intellectual property rights, but I will believe that when I see it. The US will not raise levies on Chinese imports this week, but the December hike in tariffs is still on the cards. It appears the trade spat will be drag on, so the US will probably try and draw more concessions from China on the run up to the planned levy hike in December. It was just reported that China want more talks before phase one of the trade deal is signed.

Fresh concerns about the possibility of a Brexit deal gaining approval in London as Brussels has emerged after the EU’s chief negotiator, Michel Barnier, described talks over the weekend as ‘difficult’. The mood is a little less hopeful that some sort of arrangement will be struck. On Friday, UK banks, like RBS (LON:RBS), Lloyds (LON:LLOY) plus Barclays (LON:BARC) all made sizeable gains, but this morning they are all in the red.

Sophos Group shares surged this morning after Thoma Bravo, a private equity firm, as agreed to acquire the company. Seth Boro, managing partner of Thoma Bravo, said ‘cybersecurity is evolving rapidly, as cyber threats to business increase in scope and complexity’. The announcement from Mr Boro makes it clear why the investment group wants to acquire the firm. The deal values Sophos at $3.8 billion, plus, Thoma Bravo plan to take the group private.

Aston Martin took a hit as Kepler Cheureux cut their price target to 450p from 500p. The luxury car manufacturer listed on the London Stock Exchange just over one year, and the stock fell to an all-time low in August. Concerns about the health of the global economy are weighing on the group. The economic cooling in China plus India does not bode well for the company as the group depends on the mega-rich for sales, so the outlook is likely to remain subdued.

GBP/USD has given back some of last week’s major gains as traders are less hopeful about the prospect of a Brexit deal being reached. Northern Ireland’s DUP have expressed concerns in relation to the customs arrangements as they insist the region must be treated the same as Great Britain on exiting the EU.

US equity markets are likely to see low volatility as the US celebrates Columbus Day.

We are expecting the Dow Jones to open 46 points lower at 26,770 and we are calling the S&P 500 down 7 points at 2,963.

DISCLAIMER: CMC Markets is an execution-only provider. The material (whether or not it states any opinions) is for general information purposes only and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment, or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person.

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