Fresh tariff escalation dims FTSE prospects

As the US and Chinese negotiators are looking to set a date for a fresh round of trade talks President Trump continues to escalate the pressure on his counterparts to gain leverage ahead of potential negotiations.

A new set of US tariffs is expected to come into effect Tuesday of either 10% or 25%. But the tactics may backfire as China is considering dropping any talks in the near future. This would make a quick solution impossible – something the markets were hoping for – and instead entrench the current tariffs which have the potential to be detrimental not only to trade between the US and China but also China’s and global economic growth.

European stocks reacted with a slide this morning although the FTSE 100 held up better than the CAC and the DAX.

Industry expects economy to slow but households remain optimistic.

There is a discrepancy to be observed in Britain with businesses growing increasingly worried about the fallout of Brexit while households are still not fully aware of how the extraction from the EU will affect them.

The British Chambers of Commerce believes that the persistent economic and political uncertainty is likely to affect investment intentions and reduce the level of investment in the UK while lower trade due to Brexit is expected to hit UK economic growth. The UK business lobby has lowered its expectations for growth from 1.3% to 1.1% for this year and from 1.4% to 1.3% next year as net trade makes a negative contribution.

In contrast, UK households seem to be unjustifiably relaxed about their financial situation in the year ahead.

A survey Monday showed that their expectations are at the highest since mid-2016 and that their concerns about inflation have diminished. This has been backed up by data showing that consumer spending has increased slightly in August. The currency markets were in two minds over whether this optimism is misplaced or not.

The pound was marginally weaker against the euro, trading down 0.08% while it firmed against the greenback, up 0.18%.

UK investor to vote against Unilever moving its HQ

Aviva Investors, one of the top shareholders in Unilever, plans to fight against the company’s plan to close its UK headquarters and move all of its key operations to Netherlands, a decision largely forced by Brexit.

Aviva Investors believe the move could force UK shareholders to sell their stock and offered "no upside". Unilever’s share price has been on the rise since it announced the move in March but Monday’s news tipped the scales down and it declined 0.11%.

The news marks the first serious opposition from investors to the proposed move, but given the size and influence of Aviva in the market, could lead other investors in Unilever stock to vote similarly.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.