Trade tensions in focus as the G20 begins
The heavy weighted miners were taking a beating after manufacturing data from China overnight highlighted the growing impact of the US trade war. Chinese manufacturing activity dropped to the lowest level in 2 years with a PMI of just 50, whereby 50 separate contraction from expansion. High tariffs that have been applied to both US and Chinese goods are starting to be reflected in economic data, as the G20 summit begins. Trade will be, intentionally or unintentionally, a central focus at the summit, where Trump and China’s Xi will meet to discuss trade issues.
The bar has been set relatively low for the summit which is being considered a crucial moment in the trade conflict. Few traders actually believe that a trade deal will be achieved in the coming days. However, the markets haven’t properly considered that the meeting could in fact make the trade war much worse, escalating tensions further. Should this be the case then the US could look to increase tariffs to 25% on some Chinese imports, up from 10%.
House builders struggle on lacklustre house prices
News that the housing market was struggling to gain momentum and pick itself meaningfully off a five year low, sent house builder stocks lower. Nationwide reported that house price index increased 0.3% month on month in November. On an annual basis house prices picked up 1.9%, an increase from October’s 1.6% increase – the slowest rate in 5 years.
Whilst the house price index showed an increase, this was minimal, and the signs are pointing to an extended slowdown. The subdued growth and bleak outlook for the economy means that the housing market is going to struggle to pick up any momentum. With Brexit uncertainty lingering the housing market is going to remain subdued. A disorderly no deal Brexit could see houses fall by as much as 30%. Taylor Wimpy, Persimmons and Barratt Development were all trading over 3% lower.
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