A rough session on Wall Street saw the Dow plunge more than 600 points. The massive market sell-off was led by Apple (NASDAQ:AAPL) and Goldman Sachs (NYSE:GS). It came as global trade fears combined with a stronger dollar to rattle investors. The heavy sell-off transferred to a weak start in Asia. However, Asian shares have since pared losses on US-China trade optimism and hopes of a de-escalation of trade tensions between the two powers ahead of the G20 summit later this month.
Improved sentiment across the markets stemming from trade talk optimism is seen lifting European futures ahead of the open.
Pound moves higher after wild ride
After some wild swings in the previous session, which saw the pound close 0.65% lower versus the dollar. Pound traders are bracing themselves for another potentially volatile day. Whilst Theresa May insists that Brexit talks are in the “endgame” she is still expected to struggle to win over her cabinet and Parliament, possibly stopping any deal in its tracks. These fears are being reflected in the price of sterling, which lost over 2% across the previous four sessions.
Whilst Brexit will be the central focus, investors will glance across towards UK jobs data, which will offer a welcome distraction. The pound is trading 0.2% higher in early trade in anticipation of strong jobs data.
UK wages data
Unemployment is expected to remain at current multi-decade lows of just 4%. In the eyes of the market, the UK is at full employment. A slight tweak higher or lower is unlikely to have a big impact on the value of the pound. Therefore, dealers will focus on earnings data once again. Average weekly earnings are expected to increase to 3% in the three months to September, a significant jump from 2.7% the previous month. Weekly earnings excluding bonus are expected to remain constant at 3.1%. The strongest pace of the growth in a decade.
Wage growth at 3% and inflation at 2.4% would be a win-win for the UK consumer and therefore the UK economy. This is a result which could boost the pound. However, any reaction is expected to be short lived with focus quickly returning to Brexit.
Italy & eurozone economic sentiment data in focus
Fears of Italy clashing with Brussels over spending, concerns of a no deal Brexit and a rallying dollar sent the euro to fresh yearly lows in the previous session. With ZEW economic sentiment data indicating a further decline in sentiment, it is looking dubious as to whether the euro will find a more solid footing in today’s session.