• Markets cheered by US assurances, despite weaker yuan
• German industrial slump raises recession fears
• Halifax: UK House prices fall for second month

10.11am BST

The pound is declining again today and is trading close to two-year lows versus the dollar and the euro. It is down 0.21% against the dollar at $1.2145, not far from the 31-month low of $1.2080 reached last week. Against the euro, sterling is 0.12% lower at €1.0855, not far from the 23-month low hit yesterday.

The risk of a no-deal Brexit has increased markedly under Boris Johnson’s government. When he became prime minister a fortnight ago, he said he would take Britain out of the EU at the end of October “do or die”. Investors are also fretting about the possibility of a no-confidence vote in the new Conservative government after the summer recess, or an early general election.

There are many key dates ahead for sterling, but the passing of 5 September without a successful of no confidence in the government will in our view be a further important step along the road of a no-deal Brexit on 31 October.

9.58am BST

The mood in financial markets is still fragile. Oil prices have hit a fresh seven-month low as traders worried about the impact of the US-China trade war on the global economy.

Brent crude, the global benchmark, fell nearly 2% to $58.57 a barrel earlier this morning and is now trading down 0.2% at $58.82 a barrel. Prices have tumbled more than 20% since hitting their 2019 peak in April.

• Beijing hits back after being branded a currency manipulator by Washington; yuan steadies
• European shares rise after strong German factory orders

9.43am BST

Gold has hit a fresh six-year high, rising above $1,473 this morning, after Beijing hit back at Washington’s branding of the country as a currency manipulator.

Asian stock markets were painted red overnight but shares in Europe have stabilised, no doubt helped by the strong factory orders data from Germany this morning. Germany’s Dax has risen 0.46%, France’s CAC is up 0.67%, Spain’s Ibex has edged 0.09% higher and Italy’s FTSE MiB is 0.25% ahead.

9.24am BST

UBS, the Swiss investment bank, has sent us its analysis of the impact of the 10% tariff on $300bn of US imports from China threatened by Donald Trump last Friday.

The direct impact of the new tariffs, if implemented, would reduce US GDP by 0.15%, and we estimate Chinese GDP growth in the next 12 months could fall by 0.25–0.5 percentage points as a result, which would push the country’s growth rate below 6% into 2020.

China’s response to recent trade escalations has been relatively measured and we expect a similar reaction this time, with retaliation involving a mix of more tariffs and non-tariff measures. Potential non-tariff measures include a managed depreciation of the yuan to mitigate the trade impact from higher tariffs, penalising select US companies operating in China, and imposing export restrictions on rare earth metals.

There is still time to find a compromise, trade talks between the US and China scheduled for September have not been called off, and investors should also consider potential offsetting factors such as rate cuts by central banks and stimulus in China. Our base case assumes a long, drawn-out negotiation process, during which tensions can occasionally flare up.

An environment of a) rising trade tensions and b) potential stimulus, including falling interest rates, is tricky for investors to navigate. While we ultimately believe that US–China tradetensions will be resolved through negotiations, we think equities may struggle to move markedly higher until there is greater certainty.