Markets Extend Losses For Second Straight Session on Elevated Trade War Fears

Markets across Europe are extending loses in early trade on Friday as investors respond to heightened fears of a trade war between the largest two economies in the world. 

The developments over night have seen both sides ramp up the rhetoric with Trump announcing 25% tariffs on around $50 billion worth of imported Chinese goods, provoking a response from China, who have drawn up a list of 128 US products which would be tariffed as retaliation targets.

Trade war fears and concerns over the tit for tat response between the two superpowers in not something the market is taking lightly. Overnight the Dow closed 700 points lower whilst the S&P shed 2.5% and the tech heavy Nasdaq was also off by 2.4% as equities experienced their worst trading day since 8th February. 

The negativity spread across Asia with the Nikkei taking a 4.5% hit and European bourses testing lows not seen in over a year.

Risk off dominates

Rotations continue out of stocks into less risky government debt, and safe haven the Japanese yen as traders look to take risk off the table, fast. The USD/ JPY has sunk through 105 to an overnight 16 month low of 104.63.

After falling over 1.2% in the previous session, the FTSE is already down a further 0.8% in early trade with further losses forecast as we head towards the weekend. 

After breaking cleanly through the key psychological level of 7000, the FTSE has met little resistance as it plunges lower and as as it targets 6850, it lowest level in 15 months,.

Next rallies on improved outlook despite brutal winter

Challenges facing Britain’s embattled High Street and the retail sector have been a central theme across a particularly brutal winter. Bellwether Next reported a fall in pre-tax profits of 8.1% to £726 million as a fall in sales at physical stores overshadowed a 9.2% rise in its online business. 

In store revenues dropped to £2.1 billion, whilst online business increased to £1.9 billion.

Despite the fall in profits there were also some important positives to take away. Next is making solid progress with its online offering and is moving closer to parity in online revenue and store revenue – given the important shift in consumer habits, this ability to attract online business will be key to its future. 

Secondly price inflation from the Brexit devalued pound has worked it way through Next’s system putting the retailers on a much firmer footing for the year ahead; a year in which the consumer is also expected to be in a far more comfortable position, as wages overtake inflation. 

Investors focused on the improved outlook and strong online revenue boosting the stock by over 3%.