A relief in trade tensions is helping European stocks higher after the US and Mexico reached a deal on immigration and decided to postpone tariffs on Mexican imports indefinitely. The bigger underlying factor supporting the morning’s trade is Chinese data showing the country’s exports managed to increase in May despite the US trade tariffs. Concerns that the Sino-US trade war will eventually lead to a slowdown in China’s economy have been eroding the markets for months and the data will go some way to alleviate those fears.
On the downside, China’s imports have dropped the most in the last three years and the implications of that will be felt in the shares of major European exports into China, notably German car makers, luxury goods brands and machinery producers.
Just Eat (LON:JE) was the top gainer on bargain hunting following the last week’s decline in the share price while plumbing products distributor Ferguson dropped to the bottom of the FTSE index as its revenues missed expectations.
Sterling weakens, reflecting leadership vacuum
The vacuum in the leadership of the Tory party is continuing to erode the pound which has weakened to $1.2691 this morning and the contraction of domestic economic growth is not helping either.
The 0.4% contraction in April stemmed from the car manufacturing closures triggered by Brexit and is likely to be followed up with further losses to the economy while Brexit remains unresolved.
Likely production cut extension boosts oil price
Activity in the oil market perked up over the weekend with prices breaking above $64 as Saudi Arabia signalled that OPEC was likely to extend its plans to cut production. The deal reached in December was put in place to dampen a rally in prices but after an initial plunge immediately after the agreement the upward trend was re-established, with only China trade tensions slowing down the rise.
The discussion to keep the cuts in place or not are back on the table ahead of OPEC's next meeting in June and it seems that only Russia remains undecided on whether or not to keep cuts in place. This morning Brent crude is moving up again, after a brief dip during Asian trading.
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