There were some shocks on the markets, with the Chinese stock market hitting its lowest level since January 2016. As Xi Jinping was in Russia with President Vladimir Putin, Chinese stocks were tumbling as a result of Trump’s tariffs. Both Putin and Xi hit out at US trade policies. The fact the two leaders have come together to speak out suggests Trump’s protectionist policies are bringing other nations closer.
Perhaps this was related to reports we saw yesterday afternoon, which claimed the US is proposing a new round of trade talks with China. Details are fairly thin on the ground at the minute, but perhaps the crisis that everyone has feared for some time now can be averted. Last time they met nothing much happened, but fresh talks could lead to a breakthrough. The outreach is firmly on the part of the US – certainly a change in tack and one that will likely be received warmly.
Currency movements were relatively sedate yesterday. This wasn’t entirely unexpected, given how quite the economic data schedule was. Indeed, the only release of note was July’s industrial production figures from the eurozone, which came in worse than expected. Year-on-year, industrial production fell by 0.1%, following a downwardly revised 2.3% growth the previous month. Analysts had expected a 1% increase. It is the first output contraction since January 2017.
Month-on-month, output shrank by 0.8% which was the same pace as in June and worse than the 0.5% drop the markets had been expecting. Still, the release didn’t affect euro movements all that much in truth, but it certainly will be hoped that the trend doesn’t continue for too much longer.
In sharp contrast to yesterday, today’s schedule is extremely busy, with both the European Central Bank and Bank of England announcing their interest rate decisions. Rates will be kept on hold this time around, but the markets will be looking to accompanying sentiment for hints on future policy. It will be especially interesting to see how the Monetary Policy Committee vote; last time the vote was 9-0 in favour of hiking rates, so how many will vote to hike rates to 1% this time around?
We’re going through peaks and troughs of sudden changes and then little movement (and repeat). If you want to take advantage of the quiet moments, make sure to speak to your Personal Trader about fixing in the currency exchange rate for the next 12 months. Just give them a call on 020 7898 0541 and they’ll be happy to help.