A wave of risk aversion enveloped the global markets on Thursday following the sharp decline in China’s exports which rekindled concerns over the health of the world’s second largest economy. Stock markets were vulnerable to losses after the trade data with most major arena’s struggling to maintain gains as uncertainty encouraged investors to scatter away from riskier assets. European stocks descended to two-month lows on Thursday dragged by mining stocks while Wall Street was pressured by risk aversion and China fears. Asian shares received a lifeline on Friday, partially erasing previous losses following China’s firm inflation data for September which countered the ongoing fears over the health of its economy.

Global stocks have repeatedly displayed instances of extreme sensitivity with shares violently swinging between losses and gains as oil price volatility, fears over the global economy and uncertainty leave investors on edge. The stock market rally which gripped the headlines this year continues to display signs of exhaustion with the ingredients of a bear market ripening by the day. Investors should keep diligent as it could take an unexpected event to trigger a market-shaking selloff.

China in the limelight

Sentiment towards the Chinese economy was dealt a heavy blow on Thursday following the dismal trade data for September which ignited fears over a slowdown in economic recovery. Exports fell 10% far worse than expected while imports unexpectedly shrank consequently sparking discussions over if the world’s second largest economy could maintain its current growth. The weak trade figures triggered a sense of unease across the markets on Thursday and also renewed concerns over China’s pending third quarter GDP report.

Global markets received a pleasant surprise during early trading on Friday following the sharp rise in China’s inflation for September which somewhat countered the anxiety from the dismal trade data. Consumer prices lurched to 1.9% y/y in September suggesting that consumer demand was gaining momentum in China which is supportive of GDP growth. With the developments in China gripping the global economy, there could be an increasing focus on China data as the nation transitions away from manufacturing towards services.

Dollar bulls maintain dominance

A firm Dollar has dominated the financial markets this week with most currencies bowing to the greenback as expectations mount over the Federal Reserve raising US interest rates before year-end. Domestic data from the States continues to display signs of stability while September’s hawkish Fed minutes have installed the Dollar bulls with ample inspiration. The subtle signs have made it increasingly clear that the Federal Reserve may be preparing markets for an imminent hike this year which should keep the Dollar buoyed.

Investors may direct their attention towards Friday’s retail sales data that may provide some clarity on the strength of consumption. A firm retail sales report for September should reinforce expectations over a US interest rate rise in December.

Sterling bears unleashed

Sterling was extremely pressured this week as the hard Brexit fears encouraged bears to install repeated rounds of selling across the board. The horrible combination of ongoing Brexit anxieties, political uncertainty and strengthening Dollar has left the GBPUSD in a miserable state.

There have been talks of a High Court hearing on a bid to give MP’s a voice over the pending Brexit but this could splash out further uncertainty consequently leaving Sterling vulnerable to further losses. Sentiment remains firmly bearish towards the Pound and this stalling before the Brexit could only last so long before sellers send prices much lower.

The GBPUSD is heavily bearish on the daily timeframe and a weekly close below 1.2200 could encourage a further decline towards 1.2000.