European stocks plummet on Monday, as investors reacted to escalating US – Sino trade tensions.
Google (NASDAQ:GOOGL) halting supplies to Chinese telecoms giant Huawei amid a White House ban has intensified the risk the off sentiment. The trade sensitive Dax fell the hardest in Europe, dropping over 1.8% and flirting with the key psychological level of 12000 before moving marginally higher as Wall Street pared losses.
UK housebuilders slump on house price data
The FTSE extended Friday’s losses, falling a further 0.8%. The FTSE fell less than its European counterparts thanks to cushioning from the pound at $1.27 and a rally in oil prices.
Housebuilders and travel stocks dominated the lower reaches. The likes of Barratt Development, Taylor Wimpey (LON:TW) and Berkeley Group lost between 2.75 – 4% following disappointing Rightmove house price data.
Rightmove data showed that house prices weakened in May, with prices in London down 2.5% compare to a year earlier. With Brexit uncertainty remaining elevated it’s difficult to see house demand and therefore prices moving higher in the near term.
Pound gives PM May benefit of the doubt
The pound continues to trade at levels last seen in January. After rebounding from $1.27 sterling edged higher. The PM has said that she will offer a bold plan to MP’s in last ditch attempt to get support for her Brexit deal. The pound is giving her the benefit of the doubt, but it is unlikely that MP’s will be so kind. Particularly from a government that is on its last legs.
Pound traders will now look ahead to the BoE’s inflation report due tomorrow.
Techs stocks suffer
Tech stocks are falling sharply, the Nasdaq initially dropped some 1.8% but is now off the lows. Not being able to supply Huawei one of the world’s largest telecom provider, will hit the US as well as China. This is not a win win for Trump, US firm’s revenue and jobs, particularly from tech firms will also be put at risk by Trump’s heavy-handed actions.
The potential impact on the US economy and the global economy as a whole as the two sides dig their heels in deeper is unnerving investors.
Whilst equities are losing ground, the bottom hasn’t completely fallen out of the market over recent weeks. This tells us that despite the tit for tat moves between the US and China investors are still hopeful of an agreement between the two powers. We expect this to be around the end of June when the two leaders meet at the G20. Until then high levels of volatility will be on the menu as investors jump from headline to headline.
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