Global equities resume selloff on higher US rate fears

Despite a stronger start the FTSE soon followed its global peers into the red, dragged lower by renewed selling on Wall Street.

Despite a stronger start the FTSE soon followed its global peers into the red, dragged lower by renewed selling on Wall Street.


The pound wasn’t offering much support to the FTSE, as it as good as ignored the weaker than forecast retail sales figures. After a summer of spending the UK consumer unsurprisingly tightened their belt, with sales declining by a more than expected -0.8% month on month. However, on an annualised basis we are still sitting at 3% growth which is decent. After a mixed batch of data this week and clarity over Brexit still along way off, the pound is looking tired rather than resilient.

Chinese GDP in focus
The UK mining sector has been falling across the session, as concerns are growing over the health of the Chinese economy. Chinese stocks fell heavily overnight as a toxic combination of factors saw the CSI 300 drop 2.2% to its lowest close in 31 months. Miners could be in for another difficult session on Friday, as China’s GDP is expected to decline to 6.6% in Q3, down from 6.7% in Q2.  This will be the weakest level of growth in almost a decade for China, and the first indication of the impact of Trump’s trade tariffs on the economy. Given that the full scale of the impact of the ongoing trade war is not expected to be seen until Q4 and 2019, a surprise to the down side for Q3 GDP is going to sound loud alarm bells for investors.

Higher rate fears overshadow corporate earnings
The Dow tumbled 100 points in early trade as investors continued to digest the distinctly hawkish Fed minutes. A unanimous agreement from the Fed that rates should keep on rising has sent the two-year treasury yield on to 2.9% its highest level since June 2008. This comes after the 10-year yield hit a 4-year high last week initiating a global sell off in equites. Concerns over higher interest rates dampening growth are outweighing strong corporate earnings. 

Oil Inventories increase again
Oil eased on Thursday, trading over 1% lower after the 4th weekly increase in US inventories tells investors there is no cause for concern over supply even as US – Saudi tensions ramp up and falling Iran exports offer support. US crude inventories rose by 6.5 million barrels last week, almost three times what had been expected. An this was even after US crude production dipped by 300,000 barrels owing to Hurricane Michael. Week after week oil stocks are building, even whilst the risk narrative suggests otherwise.  


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.