With U.S. markets closed on Monday for President’s Day, Asian and European markets were left setting the tone for trading in the early part of the week.
Whilst Asian markets continued to hover around four-month highs on U.S.–China trade talk optimism, European and U.S. futures were looking less rosy.
As trade remains in focus, concerns over Europe’s promised retaliation should the U.S. apply tariffs on imported vehicles kept European bourses mixed ahead of the open. Even as progress is being made between the U.S. and China, this seems less the case for trans-Atlantic trade relations.
Europe and particularly Germany are already experiencing a slowdown in growth momentum. Serious trade issues concerning vehicles, predominantly made in Germany, could easily be the straw that breaks the camel’s back.
Concerns over the health of the eurozone and German economy will remain in focus today as investors look towards ZEW economic sentiment data. Sentiment unexpectedly rose last month, despite the challenging outlook. Another increase in sentiment could help propel the euro comfortably back over $1.13.
HSBC misses estimates
HSBC Holdings (LON:HSBA) reported a 15.9% increase in profits in 2018, buoyed by growth in core business areas in Britain and Asia. However, weakness in Q4 resulted in the bank missing estimates.
HSBC reported profits of $19.6 billion, short of the $22 billion forecast. HSBC focuses on Asia since the bank makes three quarters of its profits there. A slowdown in growth in China, combined with Brexit in the U.K. could leave the bank vulnerable going forwards.
Pound slips on Honda announcement
The pound was slipping in early trade as traders digested Honda’s decision to close its Swindon branch in 2022 costing 3,500 jobs.
This is just the latest blow to U.K. manufacturing as Honda (NYSE:HMC) joins a growing list of firms that don’t see their future in the U.K. post Brexit. The news comes shortly after Nissan (T:7201) also pulled the manufacturing of the X-Trail from the U.K.
Whilst Brexit certainly plays a part here, it is also worth noting that this is part of a larger slowdown in the car industry which is also being hit by increased trade tensions and a huge shift away from diesel cars.
Will U.K. average earnings lift the pound?
Pound traders will look towards UK jobs data for a slither of optimism. Unemployment in the UK is expected to remain at 4%.
More importantly average earnings are expected to tick higher in the three months to December, increasing to 3.5%, up from 3.4% in November.
An increase of this level would be well ahead of inflation, once again easing pressure on U.K. households and offering some support to the U.K. economy just ahead of Brexit.