Pre-Market ReviewTrade War NOT Over

Investors focussed on China during the Asian session of trading. Various headlines added to the tensions between both China and the US to drag shares and futures lower. Hong Kong markets took a hit after Beijing looked to impose a new security law with the uprising last year. This received comments from President Trump stating the US would react “very strongly” to any move. Trade war tensions might make the headlines again.

It was yet another sign that the US will continue to ramp up its overall offensive on China. Washington has continually blamed China for the Coronavirus pandemic. Last week any chip supplies from the US to Chinese tech giant Huawei were blocked. Also, the US passed legislation to make it harder for Chinese firms to list shares on exchanges in the US. Can we expect more from this continuous trade war?

Currency markets were relatively stable overnight. However, China stated they would not be setting a GDP target for the year for the first time in decades. The Beijing government pledged to pump more money into the system to help stimulate growth. The lack of a target being set is an acceptance that the Chinese economy will get nowhere near the usual targets of around 7%, even with a recovery towards the end of the year.

The Yen could be in trouble

The Yen saw minimal movement despite the Bank of Japan announcing further stimulus measures at an emergency rate-setting meeting. Governor Kuroda launched a ¥30 trillion lending package aimed at small businesses struggling to stay afloat during the crisis. Combined with a previous lending program and its government and corporate bond-buying, the BOJ has now added ¥75 trillion to help the economy while the government have added ¥117 trillion. The market had widely anticipated the move, so saw little movement in Yen currency pairs.

This morning we have already seen retail sales released for the UK. Numbers came in slightly worse than expected at -22% YoY and -18.1% MoM. The poor numbers saw Sterling come under pressure across the board. Sales of clothing took the worst-hit and crashed by 50.2% compared to March.

Every sector apart from food sales slumped lower. The proportion of sales that did take place is around 30.7%, and most of them took place online. With lockdown set to ease further in just over a week, many retailers might not afford to open. Marks & Spencer already warned that the way we shop has changed forever. The big question will be whether high street retailers reopen at all fewer people allowed in the shops.

As we approach Friday, oil prices remain stable, and stocks look set to open lower for Europe and the US. Markets might continue to be nervous after we’ve seen an incredibly volatile week.