Over the short to medium term, European investors will be taking their lead from recent statistics indicating a slowdown in both the Chinese and US economies. The most likely cause of this current situation is the ongoing trade conflict between the two countries.
Perhaps the most significant development has been the sharp drop in China's manufacturing PMI to 52.8 over the month of October. This is a marked deterioration from September, when the index ended the month at 53.7. Nevertheless, it is still above its key psychological threshold of 50. This comes as most analysts are forecasting a slowdown in the country's services PMI to 53.6.
Meanwhile, the latest GDP data from the US tell a very similar story.
Previously, investor optimism had been maintained by the announcement by White House Principal Deputy Press Secretary Hogan Gidley that the US was still on track to sign the first part of the trade agreement with China despite the collapse of the planned meeting between President Donald Trump and PRC President Xi Jinping following the cancellation of the APEC summit in Chile. However, shortly after Gidley's statement, rumors surfaced suggesting that the agreement would not in fact be signed any time in the near future.
Market participants are also hotly anticipating any new Brexit developments. The EU has already agreed to delay the UK's departure for a further three months (until 31 January 2020), a proposition that British Prime Minister Boris Johnson has accepted, albeit reluctantly.
Elsewhere in the news, the Fed's latest interest rates decision was largely anticipated and its effect on investor sentiment was thus minimal. The US regulator decided to cut its base rate to 1.5-1.75% from 1.75-2%. Going forward, investors will be waiting for the minutes of this meeting to be released in the hope that they will shed some light on the Fed's future monetary policy direction.