Monday, October 8: Risk off sentiment prevailed as the negative implications of a trade war and the consequences of US interest rate rises which could track ahead of market expectations dominated investors’ thoughts. Markets moved to re-price the risk with the relative attractiveness of equities in a rising risk-free rate environment diminished versus fixed income investments. As a zero-yielding asset, gold fell 1.43% over the course of Asian & European trading sessions. The FTSE 100 closed 1.16% lower with European equity indices the DAX 30 and the CAC 40 respectively 1.36% and 1.10% lower.
Asian markets were off overnight, led lower by China’s Hang Seng(-1.39%) as the Chinese Central Bank opted to inject liquidity into the economy in face of continuing trade tensions. The People’s Bank of China announced on Sunday a cut to the reserve ratio of 100 basis points by 15 October in a bid to stimulate economic activity – the RRR is currently at 15.5% for large commercial banks and 13.5% for smaller banks. This marks the third time in 2018 central bankers have acted to stimulate the Chinese economy.
En masse, in the absence of major stock specific news markets focused on macroeconomics. Perhaps the most eye catching stock announcement was the news that Thomas Cook is to wind up its aged Club 18-30 brand after unsuccessful attempts to find a buyer for £5m. Those of you looking for one last jaunt can make the last flight from Manchester at the end of the month, Thomas Cook was unchanged on the announcement.