Equity markets under pressure

An increase in trade tensions, as the US proposes tariffs on imports from China and China promises  retaliatory action, is weighing on equity markets. The main stock indices in the US were off between 2.5% and 3% yesterday, while Asian equities have also been hit hard overnight. European stocks are opening weaker again this morning also, having shed around 1.5% yesterday

Government bonds yields in the core markets have fallen as stocks sell off; 10-year yields in the US are down around 10bps from their intra-week high at just over 2.8%, with equivalent German yields also about 10bps lower at a little over 0.5%. On the currency markets, the yen has strengthened against the dollar to trade below Y105, though the euro is little changed against the US currency at just over $1.23

Sterling strengthened against the euro, albeit only briefly, following the latest Bank of England interest rate decision, rising to an intra-day high of around 86.7p before giving up ground again.  The BOE left interest rates unchanged at 0.5%, but two of the nine members voted for an immediate 25bps hike, and it only seems a matter of when (most likely May) not if it will raise rates again

Retail sales in the UK rebounded in February, rising by 0.8% after falling by 0.2% in January. On an annual basis, sales were up 1.5% on the same month in 2017.

The composite PMI for the Euro area fell for a second month in March, according to the flash reading, to 55.3 from 57.1 in February. This points to some loss of momentum in the pace of growth in the zone, though it still remains solid

Data due today include new homes sales and capital good orders in the US