Markets have kicked into life today, with US equity indices tumbling from their elevated perch. Falling by approximately 2% across the board, the sell off across the Atlantic has left a risk-off feel within markets, with investors flocking to safety. From the two graphs below, investors’ concerns can be clearly seen. The first graph shows both the NASDAQ Composite Index (Blue) and the NYSE Composite Index (Orange) in relative freefall, shedding hundreds of billions of Dollars from the value of US companies. In the second chart, the value of Gold, a traditional safehaven immune from the swings of more volatile and risky assets, can be seen to rise by 0.5% as rising demand unbalanced yesterday’s value.
The rally in safehavens and the selling of more risky assets, including emerging market currencies, has been precipitated by concerns that the trade war between the US and China, the effect of which had started to be priced out, may be reigniting. With the arrest of the Chief Financial Officer of one of China’s largest companies with a market cap larger than that of Apple and with considerable reach within the United States of America, there have been market-wide fears that the ceasefire between the two trading leviathans could be called off and tariffs ramped up once again. Within the Pound, developments in Westminster continue to cause disturbances. The Pound has received a bid today as the possibility of a no-deal Brexit seems increasingly unlikely. Whilst a second referendum would also contribute to political uncertainty, the increasing improbability of Carney’s chaotic no-deal scenario continues to support the Pound.
Today’s Global Market:
Discussion and Analysis by Charles Porter