European Bourses Sink As Trade And Political Tensions Hit Sentiment

Trade tensions and political concerns ensured European indices suffered another bout of selling on Thursday. Optimism from the previous session quickly evaporated as the markets opened and investors positioned themselves in response to more conflicting messages from the White House and ahead of the potentially contentious EU Summit.

Whilst the FTSE shed 0.3% heading towards the close the German Dax was off 1.8%, giving back all the gains from the previous session. The Dax is on track for a 3.6% loss across the week so far with potential to slip further should the trade war climate worsen.

Merkel Under Pressure

All eyes are focused on the EU Summit where the EU leaders have plenty to discuss. Whilst this Summit was originally supposed to be a big date in Brexit negotiations, the UK failing to publish a key white paper on UK – EU post Brexit relationship demands means little or no progress is expected. 

Instead EU leaders will focus on the migrant crisis dividing the EU. German Chancellor Angela Merkel is under mounting pressure domestically to find a solution to the asylum crisis that satisfies her coalition partners. Failure to do so could see the collapse of her fragile government. The markets will want to see some progress in this critical issue.

Pound dips below $1.31

The pound was looking pretty miserable, sinking below $1.31 for the first time since mid-November. Lack of progress in Brexit and comments from BoE policy maker Cunliffe expressing his concerns over high levels of household debt, put a dampener on hopes of a rate rise, pulling sterling lower. 

Not even an unexpected drop in US GDP was sufficient to pull the pound out of the doldrums.

US Q1 GDP dropped unexpectedly

The US economy grew more slowly than initially anticipated in the first quarter. US Q1 GDP unexpectedly fell to 2% in the final revision, down from 2.2% and a noticeable decline from 2.9% growth in the fourth quarter. 

Whilst these figures are slightly disappointing they come hot on the heels of a closely watched GDP tracker by the Atlanta Federal Reserve which indicates that the US economy will grow by 4.5% year on year in the second quarter. Six months on from the US tax cuts The Preliminary reading of US Q2 GDP will be released on 27th July.

Amazon Continues Expansion Into Healthcare business

US Pharmaceuticals were the standout decliners as trading kicked off stateside. Amazon’s decision to buy online pharmacy PillPack, as it continues to takeover the world, has unnerved investors of Walgreens and CVS which both declined 10%. 

The move by Amazon which is expected to disrupt the drugstore business, isn’t that surprising given that Amazon CEO Jeff Brazos, along with JPMorgan Chase and Berkshire Hathaway are creating a healthcare company. Amazon shares were trading 0.8% higher.