Stocks remain somewhat optimistic despite a lack of major trade war progress, with a 9.9% slump in factory profits highlighting the impact on Chinese business. Meanwhile, the tightening UK polls continue to drive the pound lower.
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Chinese factory profits decline 9.9%
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US data set to dominate today
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Sterling declines as polling continues to play key role
Sterling weakness is continuing to push the FTSE 100 higher, with the headline UK index outperforming its mainland European counterparts. Global sentiment isn’t exactly soaring, with developments on the US-China relationship providing little tangible evidence that we are on the cusp of a phase one deal. There is optimism that such a deal can be agreed, yet the length of time taken, and lack of progress tempers some of the bullishness evident throughout global markets. The impact on this ongoing breakdown in trade was evident from overnight data out of China, showing a 9.9% decline in factory profits.
While both sides play it cool, there is a clear desire to move on from this trade war, with markets eagerly awaiting the US perspective when a raft of data points are released this afternoon. Given the time of year, traders should keep an eye out for the latest personal spending figures out of the US, which have been steadily climbing over the years despite the weakness seen over the past two monthly readings. However, the headline grabber will come on any shift in the GDP, with todays second reading widely expected to maintain the first reading of 1.9%.
The pound has continued to decline this morning, despite yesterdays car crash appearance from Jeremy Corbyn on the Andrew Neil show. With Johnson taking the hot seat later this week, we are unlikely to see anything other than a similar outcome from him. The recent tightening in the polling between the two main parties does raise questions over whether we will get the market friendly Conservative majority many had become increasingly confident in seeing. Despite the tone shifting towards antisemitism over recent days, we are sure to see Corbyn get the train back on track as they hammer home the benefits of their wealth redistribution policies. The question is whether the Tories can continue to gather votes after they drained much of the Brexit party support. With Labour likely to target anti-conservative SNP and Lib Dem voters, the polls will continue to play a key role as we move towards this critical election.
Ahead of the open we expect the Dow Jones to open 66 points higher, at 28,188.
