FTSE struggles to stay in the black as Asian markets decline

European bourses are struggling to keep their heads above water this morning – opening in the black but quickly dipping into the red as trade war fears eroded gains in Asian markets. The escalating trade war between the US and China is continuing to hit Chinese stock markets and the yuan although the country’s central bank stepped in Monday to support the currency. The trade dispute is showing no signs of abating on either side with China saying on Friday it plans to bring in tariffs on $60 billion worth of US goods. It could end up being a case of who can last longer in terms of taking financial damage from the rising tariffs. 

German factory orders fall in June and drag down euro

The euro is suffering a head cold this morning, trading down against the dollar and the pound after German economic data showed that the country’s factory orders fell by 4% in June. The order book was expected to shrink by only 0.2%. The kneejerk interpretation is that the decline is directly linked to US trade tariffs, particularly because factory orders from outside the Eurozone have fallen by 6%. However, in May these same orders rose unexpectedly, as did the country’s manufacturing PMI - to a hefty 57.3. A number over 50 indicates expansion and 57.3 means that German manufacturing is going strong. There is no doubt that Trump’s tariffs will have an effect on German industrial production, particularly its core car manufacturing business because US tariffs are specifically targeting European car makers. But there are other factors at play as German car makers have to step up to new car emission test standards in the wake of the Volkswagen debacle. German balance of trade data Tuesday and the first set of second quarter GDP numbers on Wednesday should shed some more light on the state of Europe’s biggest economy. 

HSBC shares slip as bank reports small profit increase

Shares in Europe’s biggest bank are dipping this morning after the bank reported a relatively small increase in pretax profits. However, the bank has changed gears and is moving into growth mode after several years during which the business was restructured and cut in size. A substantial chunk of the profit was also diverted into provisions against the sale of U.S. mortgage securities which means that by the next quarter the bank’s profits should start showing their full size.