Stock markets continued to feel the pinch of trade tensions between the world’s two largest economies as the clock runs down on the US’s threat to increase tariffs on Chinese imports.
US President Donald Trump stuck to his hard-line stance, saying China “broke the deal” and would have to pay. Some commentators see this as Trump’s way of achieving better terms.
The Chinese Yuan weakened further, having dropped to its lowest level since January. The Japanese Yen continued to strengthen, emerging market currencies are getting a squeeze and the Korean Won topped the list of losses. In addition, weaker-than-forecast lending data for April has hit the renminbi hard, emphasising just how important the trade talks resuming today are.
In Europe, despite fears of growth slowdown in Germany, the Euro held to its position. The European Commission cut its growth forecast for the bloc’s powerhouse on 7 May from earlier predictions of 1.1 per cent to 0.5 per cent down.
German newspaper Bild has reported the country is facing a budget shortfall of €100 billion over the next four years, leaving Merkel’s government with a €11.1 billion fiscal gap to fill for this year alone. This is attributed to a drop in growth, which has been well behind the forecast in recent months and tax revenues that are falling well short of projections.
In the UK, the Brexit stories rumble on. Amid growing demand for her to quit, Prime Minister Theresa May said she would make a fourth attempt to break the Westminster deadlock on Brexit before the European election takes place on 23 May.
Today the US will publish producer price inflation (PPI) data, which will be followed by an address from Federal Reserve Chair Jerome Powell.
Global uncertainty rattles stocks