FTSE Plunges as Tariff Tussle Sets Back Equity Markets

Fundamental analysis of Forex market

The FTSE has dropped sharply on Monday. In the North American session, the pair is at 7,167, down 1.5% on the day. Earlier in the day, the blue-chip FTSE dropped to 7,152, lowest level since late March. There are no U.K. events on the schedule. On Tuesday, the U.K. releases wage growth and unemployment claims.

Trade tensions between the U.S. and China continue to rock global equity markets. The blue-chip FTSE index has been hit hard, falling 1.5% last week and falling sharply on Monday. The US. and China have exchanged tariffs on each other product’s dampening hopes for a trade deal and weighing on risk appetite. Nervous investors have been dumping equities in favor of safe-haven assets, such as the U.S. dollar and the Japanese yen. On Friday, the U.S. raised tariffs on $200 billion in Chinese goods, from 10% to 25%. The move was announced a week ago, and sharp declines in the equity markets have boosted the yen. The Chinese response was vigorous, with Bejing announcing earlier on Monday that it would slap tariffs on $60 billion of U.S products.

Despite the escalation in the trade war, talks between the U.S and China continue, with officials scheduled to hold the next round of talks in Beijing. The new tariffs do not apply to Chinese goods that left port prior to May 10, affording a 2-week window for negotiators before the tariffs take effect. The escalation in tensions has shelved a meeting between President Trump and Chinese President Xi, but the two leaders could meet at the G-20 summit in Japan in June.

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British data was a mixed bag on Friday, leaving the pound unchanged. The monthly GDP release declined in March by 0.1%, above the estimate of 0.0%. There was better news from the quarterly indicator. Preliminary GDP for Q1 came in at 0.5%, matching the forecast. This was up from final GDP in Q4, which climbed 0.2%. Manufacturing Production remained steady at 0.9% in March, crushing the estimate of 0.1%.

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