European markets lower, as UK housing confirms August slump

• Asian trade balance data sees Chinese exports improve
• UK house prices see sharp 1.9% decline in August
• US tech selloff in focus, with FOMC appearances and jobless claims impending

Sentiment throughout Asia and Europe has taken on a pessimistic tone, feeding through from the US. Overnight trade data saw both Chinese and Australian surpluses decline, with both nations seeing their balance shift in favour of imports. However, we are seeing some signs of improvement, with year-on-year Chinese exports in particular shifting from -14.5% to -8.8%. Could this represent the bottom for the Chinese economy?

The housing market continues to flash warning signals on either side of the Atlantic, with US mortgage demand falling into a new 27-year low. In the UK, the effects of higher rates continue to take their toll on demand/supply dynamics, with Halifax noting a dramatic 1.9% decline for house prices in August alone. Taking the Halifax (4.6%) and Nationwide (-5.3%) surveys together, we are starting to see a consistent story of weakness within the housing market that will hurt both banks and homeowners alike. For the Bank of England, there will be a hope that this lack of housing activity reflects a shift in affordability that will ultimately feed through to drive inflation lower via weaker consumption.

US market sentiment remains on unstable ground, as 10-year yields push higher and the US dollar continues to gain traction. Inflationary pressures threaten to rear their head once again thanks to rising oil prices, as a lack of investment and a slow transition away from fossil fuels bring the potential for a hugely damaging squeeze for energy costs once again. Yesterday saw US oil rise for the 10^th consecutive day; the longest streak of gains since 2019.

US tech stocks have found themselves under pressure over the course of this week, with some of the big hitters losing traction. Yesterday saw Apple come under the microscope, with China seeking to expand their iPhone ban on government officials to cover state firms and agencies. With the tech powerhouse having a huge Chinese presence, any move toward positioning their product as an external security risk will do little to help sentiment for sales in the region.

Looking ahead, the US economic picture continues to fall under the microscope, with unemployment claims expected to head higher after three-weeks of declines. Coming off the back of a surprise jump for the ISM services PMI survey yesterday, markets remain on the fence over what to expect from the Federal Reserve at the next meeting. Appearances from FOMC members Harker, Goolsbee, Williams, and Bowman should help provide greater clarity on that front.