Rising trade tensions and a global growth downgrade from the IMF has weighed on European stocks.
Europe
Trade tensions between the EU and the US have heated up, and either side have accused the other of subsidising the aerospace sector. The EU economy is cooling, and the prospect of $11 billion worth of tariffs on European goods is likely to sour sentiment even further. The IMF have trimmed their 2019 growth forecast for the eurozone and the UK by 0.3% each, the German forecast was lowered by 0.5% - and that was a major blow to investor sentiment given Germany’s dominance in Europe.
Airbus shares are in the red after the US threatened to impose new tariffs on EU products as the argument over subsidies heats up. The US claims that Brussels have been subsidising Airbus and that has led to an adverse effect on the US, meanwhile, the EU claim the US government has given illegal aid to Boeing (NYSE:BA). The ratcheting up of tensions between the US and the EU comes at a time when the EU economy is struggling, and given the Brexit uncertainty, the last thing the EU needs is a full-on trade war with the US.
Societe Generale (PA:SOGN) revealed restructuring plans and could lead to up to 1,600 job losses. The bank is looking to wind-down its over-the-counter commodity business, and its proprietary-trading unit. The wealth management business will cut costs, and the company plans to merge two divisions in its financing and advisory department.
Hays shares are in the red after Morgan Stanley (NYSE:MS) reduced its rating on the stock to equal-weight from overweight, and it reduced its price target from 200p to 185p.
JP Morgan lowered its rating for Pennon Group to neutral from over-weight, and the bank cut its price target to 780p from 800p.
US
The S&P 500, Dow Jones and the NASDSQ 100 are all in the red this afternoon as traders are worried about the state of the global economy. In recent weeks, the European Central bank lowered its growth forecast for the euro-area, the Federal Reserve lowered their growth forecast for the US, and now the IMF have trimmed their outlook for the world economy. The group predicts the global economy will grow by 3.3% in 2019, and the previous forecast was 3.5%. The IMF anticipates US growth to be 2.3% in 2019, down from a 2.5% forecast.
The JOLTS report came in at 7.08 million, which undershot the 7.55 million forecast, and was a drop from the 7.62 million reading in January. The US jobs market is in rude health and a slight dip in the number of jobs openings isn’t anything to get too worried about.
FX
The US dollar index has lost ground today. The greenbacks continued weakness has given assistance to the single currency and the pound
EUR/USD has been helped by the softer US dollar. Today was one of the quieter days in terms of economic reports. Italian retail sales grew by 0.1% in February, and the January report was revised upwards from 0.5% to 0.6%.
GBP/USD is surprisingly steady given the Brexit uncertainty. Tomorrow will be a crucial day in the Brexit saga, as the EU will let Prime Minister May know if the UK’s departure can be extended. A rejection of the extension request would essentially pave the way for a no deal Brexit on Friday.
Commodities
Gold has managed to creep higher again thanks to the dip in the US dollar. The weakness in the greenback has propelled the commodity higher. Gold has been in an upward trend since mid-November, and if it can hold above the $1,300 mark, its positive move should continue.
Oil eked out yet another five month-high in early trading before drifting lower. The oil market has been in a bullish run recently and cuts from OPEC, sanctions on Iran and Venezuela, and conflict in Libya have all added to the positive move. Russia is not a part of OPEC, but it has been in co-operation with the group of oil producers, and the country has signalled its interest in increasing output at the June meeting.