European markets are stuttering in early trade today, with the likes of the FTSE 100 and DAX largely treading water since Friday’s selloff.
Fresh data out of the UK saw the August GDP figure tick up to 0.1%. Coming off the back of the IMF projection that UK GDP would come in at 1.3% for both 2025 and 2026, today’s YoY growth figure came in at that same level.
However, the IMF warning that the UK will continue to see the highest rate of inflation in the G7 highlights why the Bank of England are likely to remain cautious in their approach going forward.
Unfortunately, that inflationary push could continue in the years ahead if the latest commentary from British energy executives are to be believed, with testimony from Octopus Energy’s Rachel Fletcher and Centrica’s Chris O’Shea warning that renewable initiatives could push household electricity bills 20% higher within four to five years.
The US-China spat looks set to take another turn after Trump warned that he could terminate the purchase of cooking oil in response to the recent collapse in Chinese purchases of US Soybean.
Despite Trump’s efforts to calm markets over the weekend, we have seen subsequent claims that China seeks to turn up the pressure by further deepening the trade conflict in the knowledge that it could spark a sharp slump in US equity markets.
Thus far we are yet to see any substantial pullback for US stocks, with the Dow, SPX, and Nasdaq all having recovered much of the downside seen on Friday. Earnings season has kicked off on a largely positive tone, with strong performance for the big banks. Nonetheless, despite the fact that all six of the major US banks reporting this week having topped earnings estimates, the fact that the sector has remained largely flat over the past week highlights the fact that much of the earnings strength will already be baked into the price.
Donald Trump has claimed that India have finally agreed to move away from purchases of Russian crude, opening the door to a trade agreement between the two nations. Nonetheless, this also adds potential volatility for energy prices, with Indian efforts to source crude oil meaning we could see prices tick higher.
On the other hand, there is a hope that Trump’s efforts to squeeze Russian income sources could ultimately help drive renewed negotiations to find a resolution to the conflict in Ukraine. That would ultimately bring optimism around a potential economic deal between the US and Russia, raising the likeliness that Putin’s crude will be able to flow freely around the world once again.
