Ongoing geopolitical tensions across the globe and heightened political risk in Europe have limited appetite for riskier assets this week, with global stocks now on the back foot. Asian share concluded in the red on Wednesday, as the uncertainty from world events left investors on edge.
The sterling was volatile on Tuesday, with prices oscillating between losses and gains after markets digested the UK’s steady 2.3% inflation figure for March, which was the highest level since September 2013. The ongoing currency weakness created by Brexit, coupled with rising oil prices has elevated inflation above the Bank of England’s 2% target, with speculation mounting over CPI following its positive trajectory this quarter.
The Dollar Index breached above the 101.00 resistance level on Friday, after markets received March’s mixed US jobs report positively. Although the dismal NFP figure of 98k initially sparked some jitters, this was swiftly countered by the unexpected decline in unemployment rates that dropped to their lowest levels in almost 10 years at 4.5%.
Global stocks were vulnerable to sharp losses during late trading on Wednesday after investors were caught unprepared by the hawkish Federal Reserve minutes. The negative momentum has already rippled into Thursday’s trading session with Asian shares concluding depressed. European markets may be exposed to further downside shocks as anxiety ahead of the Trump-Xi summit dents risk sentiment.
Although UK’s FTSE100 attempted a miraculous rebound during early trading via sterling weakness, sellers simply exploited the technical bounce to drag prices lower. Wall Street may be in store for further punishment moving forward as risk-off is the name of the game ahead of the meeting between Donald Trump and Chinese President Xi Jinping.