Miners drag FTSE lower as US Sino trade tensions resurface

The optimistic start to the week was short lived and global equities resumed the downwards trajectory on Tuesday.

The optimistic start to the week was short lived and global equities resumed the downwards trajectory on Tuesday. The FTSE, grinded lower across the session, weighed down by weaker miners as metal prices took a hit from rising trade tensions. Thomas Cook and house builders were also standout decliners. The weaker pound gave a boost to the multinationals on the FTSE which benefit from a more favourable exchange rate.

As we head towards the G20 meeting at the end of the week in Buenos Aires, trade tensions between US and China were always going to be a central focus. However, traders had been hoping that we would have seen an improved tone between the two powers by now. The fact that Trump remains adamant that tariffs on Chinese goods will increase to 25% indicates that the talks are no further along. Any market optimism of easing trade tensions is misplaced. This is not a passing theme and is one that the market will need to accept is here to stay at least for the medium term. If little progress has been made so far, it is difficult to see what will change over the coming months.
Base metal prices, which are particularly sensitive to developments in China, were trading lower, dragging the heavyweight miners’ southwards. 

Brexit uncertainty weighs on sterling
The pound is on the decline as Brexit uncertainty is proving too much for pound traders to stomach. Sterling extended losses for a fourth consecutive day, dropping 0.7% versus the dollar. Theresa May continues to try to drum up support for the Brexit plan, ploughing stubbornly on, even as Trump suggests that the deal in its current state could prevent a trade deal being done with the US. 

The 11th December has been set for the vote in Parliament on Brexit. It almost goes without saying that the pound will be under significant pressure until then, as traders try to position for a highly unpredictable event.

Dollar strong as US consumer confidence remains solid
Whilst the pound was suffering from Brexit uncertainty, the dollar charged higher as US consumer confidence came in on target. US consumer confidence ticked down from its 18 year high of 137.9 in October, to 135.9 in November. Confidence in the US remains high thanks to low unemployment a strong jobs market, low inflation and low interest rates. However, concerns over the Fed’s hiking plans has just taken the edge off spirits, pulling the consumer index marginally lower. 

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