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Political tensions and monetary policy to dominate this week


The FTSE dropped 8 points in early trading this morning, with the mining sector doing it’s best to keep the index on an even keel.

The drop follows “a re-escalation of geopolitical tensions ahead of a joint US and South Korean military exercise, which in turn has led to a negative session for Asian equity markets” suggests Accendo Markets Analyst, Henry Croft.

“The manoeuvres have prompted a hostile reaction from Seoul’s neighbours to the North, claiming that a ‘merciful strike’ will be unleashed upon the US territories of Guam and Hawaii.”

Over in the Eurozone “the losses were greater despite the euro slipping 0.2% against the dollar.” suggested Spreadex Analyst Connor Campbell, adding “The DAX and CAC, both of which are down 0.5% to 0.6%, are still somewhat affected by the tragic events in Spain last week, as well as the generally negative tone of trading that seems to have taken hold of the global indices.”

Over in the US, equities closed lower on Friday. The did, however, welcome “the news of Steve Bannon’s departure from the White House…eventually closing off session lows.” commented Henry Croft.

“The Nasdaq outperformed, falling by just 0.1%, while the S&P 500 fell by 0.2%. The Dow Jones underperformed, closing 0.5% lower as Nike weighed following weak results from Foot Locker.”

This week, investor attention will turn to the macroeconomic agenda with the world’s central bankers meeting in Jackson Hole.

“The focus will undoubtedly be on Mario Draghi and Janet Yellen, the heads of the European and Central Bank Federal Reserve” suggested ADS Securities Analyst, Konstantinos Anthis, “for clues about their monetary policy goals.”

“Both banks have been bullish in recent months buoyed by the strong employment market performance in the US and the improving of Eurozone’s finances on the other side of the Atlantic and their goal has been to start – or continue – tightening their monetary policies.”

However, recent data suggests that the performance of their domestic economies has cast some doubt on whether the Federal Reserve and the European Central Bank can move towards a monetary tightening policy at the moment.

“Inflation has been a long-standing issue for both regions and with limited progress being made in this area any tightening could harm fragile economic growth.” added Anthis.

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