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Trade war fears drive markets once more

The prospect of a no-deal Brexit is growing as Jeremy Hunt said he would prepare a provisional budget in case the UK crashes out of the EU.

Centtrip: Trade war fears drive markets once more

The British economy might need help to cope with a downturn as the ongoing US-Chinese trade war and a no-deal Brexit were growing risks, according to Mark Carney.

The dovish comments from the Bank of England’s (BoE) governor prompted investors to increase their bets on monetary policy easing. They also added to fading hopes of a trade deal between the US and China, once again having driven demand for safe-haven assets and causing US bond yields to drop to their lowest level since 2016.

The Dollar Index, measuring the greenback against a basket of six major currencies, was a shade lower at 96.697, having pulled back from 96.875. Sterling held firm at $1.2592, after shedding 0.35 per cent the previous day and reaching a two-week low of $1.2584.

Growing fears over decelerating global growth could be moving towards another global recession,  according to US economist Nouriel Roubini, who famously called the housing bubble that sparked the last economic crash. The US and China have recently called a truce in their year-long trade war, but Roubini doubts the world’s two largest economies will work out a long-term agreement anytime soon.

In Europe, the single currency received a lift following the news that policy makers were in no rush to cut interest rates at their meeting later this month. However, this was short lived as Christine Lagarde, the Head of the International Monetary Fund (IMF) and well-known dove, has been tipped as the next president of the European Central Bank (ECB).

In UK news, Tory leadership contender Jeremy Hunt signalled that a no-deal Brexit could cause as much damage as the previous financial crisis. The Secretary for Foreign and Commonwealth Affairs also claimed he would do whatever is necessary, even crashing out of Europe without a deal, suggesting that the reported £90 billion price tag of a no-deal Brexit was worth paying.

This morning, Europe will release its Purchasing Manager’s Index for the services sector.

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