The sell off slows down

The slide in equity markets continues but the ferocity has been toned down. The Dow Jones Industrial Average is down about 140 points, which seems positively sedate compared to yesterday’s 830 points. The dramatic US stock market plunge expected this morning did not materialise and instead the selloff has slowed down to a more regular pace.

In London house builders and Brexit are not making for a good mix and property companies are high on the hit list of stocks to sell. Enter Barratt Development, trading down 11.2% on the day. Barratt peer Taylor Wimpey was also sold off but by a comparatively moderate 3.7% in the wake of data showing declining house prices and stalling sales, particularly in the pricey London boroughs and the capital’s commuting belt. No such slowdown if you are trying to buy a flat in Belfast. British banks are now getting ready to batten down the hatches and cut down both on business loans and mortgage lending in the lead up to Brexit.

Though gold prices have not done much over the course of this year they are looking attractive at the moment given the frenzy in other markets. A rally in gold has also helped gold miners like Mexican-based Fresnillo and South Africa’s Randgold, propping them up by over 8% on the day.  

US jobless numbers

US jobless numbers picked up slightly in early October but they still at a historically low level, with numbers not seen since the late 1960s. They could balance out some of the hysteria in the bond market generated by the previous set of data indicating that the US labour market was not far from full employment, or as close as it is possible to get to at that level. There is a sense that the bond market got ahead of itself in the last week in the belief that the US economy is almost getting too strong and that wage and inflationary pressures will start taking their toll. While there is some reality in that assessment, particularly given that some of the stimulus provided by the Trump administration will soon come to an end, Thursday’s data is painting a picture of an economy that is expanding but not necessarily overheating.  

Another day, another shot at China

US President Donald Trump took another shot at China Thursday, saying there is a lot more he could do to hurt China's economy in addition to the import tariffs he has already put in place. The comment could be part of Trump’s tactic to soften his opponents ahead of a potential conversation during the G20 leaders summit in Argentina in November, which will also be attended by Chinese President Xi Jinping. But so far China has responded in kind to all of the US threats and this tactic may backfire eventually, particularly given that China is the biggest holder of US government bonds.