Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s a worrying time in the financial markets, as emerging economies across the globe come under pressure.
Emerging market stocks have fallen steadily for several days, hit by worries over global growth prospects, the strength of the US dollar, and the various trade disputes being driven by the White House this year.
Markets were a sea of red yesterday, with notable losses in China, Saudi Arabia and Indonesia, as traders scurried for safer assets.
There are fresh losses in Asia today, dragging stocks in the region towards a one-year low (more on that shortly).
The dollar is currently at its highest level in over a year against a basket of emerging markets currencies, with some at a record lows. That makes it tougher to service foreign debts, drive up inflation, forcing policymakers to consider steep interest rate rises that will throttle growth.
With Argentina signing up for an IMF bailout, Turkey fighting a currency crisis, and Brazil gripped by a corruption crisis, there’s plenty to worry the City right now.
Another concern: Donald Trump could deepen the trade war with China, by signing off tariffs on an extra $200bn of imports. An announcement could come today.
Such an escalation could cause further harm to China’s economy, with ripple effects hurting other companies in the global supply chain too. That’s another reason emerging markets are feeling the strain today.
As Christophe Barraud, an economist at the Paris-based brokerage Market Securities, put it:
“People are looking closely at what’s happening in emerging markets, at the trade war and the fact that the United States is likely to implement another wave of tariffs against China.
If you look at global growth, more and more signs are that it will slow in coming months.”
European markets are expected to dip this morning, after the FTSE 100 hit a four-month low yesterday.
This follows losses on Wall Street last night, led by the technology sector, after Facebook’s Sheryl Sandberg and Twitter’s Jack Dorsey were grilled at Congress.
The session has raised speculation that social media could face tougher regulation, to crack down on fake news, harassment and interference by rogue states.
As Mike van Dulken of Accendo Markets explains:
Calls for a negative open come courtesy of downbeat trading on Wall Street, with the Tech sector sharply lower following testimony from Twitter and Facebook to US Congress.
The turmoil within emerging markets also continues, widening from Argentina and Turkey, dampening global sentiment even further all the while we await the US decision on additional China import tariffs.
- 7am BST: German factory orders for July
- 1.30pm BST: US weekly jobless figures
- 3pm BST: US service sector PMI for August