European markets got off to a poor start to the week yesterday, slipping to seven week lows, with investors once again reluctant to try their luck against a backdrop of rising political risk, on both sides of the Atlantic.

While US President Trump has extended his one man crusade to the US court system, after his travel ban was overturned, any notion of a more stable political outlook in Europe took another twist over the weekend, as a narrowing of opinion polls in Germany, cast doubt on Angela Merkel remaining as Chancellor later this year, while Marine Le Pen launched her bid for the French Presidency as well.

Against this backdrop it was perhaps no surprise that European markets slid back sharply with the Italian FTSE MIB sliding the most after UniCredit’s (LON:0RLS) €13bn capital rising got off to a rather inauspicious start, as the shares slid nearly 7% on the day to close at their lowest levels this year.

As is normal against an uncertain political backdrop gold prices have spent the last few days edging higher, hitting a two month high yesterday, on a combination of diminishing prospects of an imminent Fed rate hike, and rising political uncertainty in Europe and the US.

The rise in gold prices was also helped by comments from ECB President Mario Draghi in a speech to the European parliament where he insisted that the ECB remained committed to its current policy path, and that now was not the time to rein back on the current easy monetary policy, and would look through what it considers transient factors.

The main focus today as European markets look to open slightly lower, is the latest US December trade numbers which are expected to show a deficit of $45bn. Given the propensity for Donald Trump to tweet about how US economic data has been when it’s been good, it’s quite likely that we could see some comments about the size of the deficit, particularly in relation to recent comments that have been made about surplus countries like Germany, and China, whose numbers are out later this week.

Source: UK

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