Brian Nick, the chief investment strategist at Nuveen, reckons investors have already ‘priced in’ a trade deal between Washington and Beijing.

That would explain why the markets haven’t rallied more strongly today.

As Nick put it on Bloomberg TV, this is why we see “diminishing returns every time one of these sort of good-news stories comes out over the weekend”.

Today’s sell-off rather bucks the trend of 2019, which has seen shares rise steadily.

The Dow ended Christmas Eve at just 21,792 points, after several weeks of losses. But since then, it’s mostly been moving upwards, back over 26,000 points (until today).

This chart from Marketwatch shows the Dow’s recent performance.

One day’s losses won’t hurt investors, but it might make them worry that sentiment is turning a bit sour.

Fawad Razaqzada, market analyst at Forex.com, points out that the US dollar is holding up well:

The stock markets have slumped today. For once, investors have not bought the “close” headlines in reference to US-China trade deal.

However, the dollar has remained supported for now, despite US President Donald Trump’s latest criticism of the Fed’s Chairman Jay Powell.

Wall Street isn’t taking too much comfort from today’s report, in the Wall Street Journal, that the USA and China are ‘closing in’ on a trade deal.

We’ve seen these headlines many times; investors want concrete proof that tariffs will be lifted.

Plus, hawkish China critics in Washington want confirmation that Beijing is addressing intellectual property theft. A commitment to buy more soybeans and Jack Daniels won’t cut it.

Connor Campbell of City firm SpreadEx says:

Reports that Trump and Xi Jinping could meet at some point in March in what, on paper at least, would be a significant step towards easing the trade tensions between the 2 superpowers were treated with a certain level of wariness by investors, who are perhaps sick of speculation and rather more keen to see some actual action.

Back on Wall Street, shares have taken a sudden shift downwards.

The main indices have lost more than 1% - without any obvious trigger either.

All but 2 of the 30 stocks on the Dow have fallen, as it heads for its worst day in two months....

The news that Britain’s construction sector shrank in February didn’t help sterling today.

The pound has dipped against the US dollar to $1.318, as traders took a cautious view.

Fiona Cincotta of City Index says worries about the UK economy are building; a healthcheck on the service sector tomorrow could also be worrying.

Despite a strong start for the pound, dismal construction sector data and a strengthening dollar, saw cable drop below $1.32. The UK construction sector slipped into contraction in March, dropping to 49.5. This is the weakest reading for the sector since March last year. Brexit uncertainty slowing business decisions, holding up investment and builders unable to get the materials required amid increased stockpiling are hitting the sector. The pound dropped lower on the release, falling below $1.32. It is currently encountering resistance at $1.3180, a meaningful break through this level could open the doors to $1.3160.

With manufacturing and construction showing the impacts of Brexit, traders will look towards the service sector PMI tomorrow. The dominant service sector grinded to a halt in January and the expectation is that February wasn’t much different. Given broad weakness across all sectors of the UK economy, it is difficult to see how Britain will avoid a contraction in the first quarter.

Here’s our news story on the slowdown in UK construction:

America’s construction industry has also hit a speedbump.

US construction spending shrank by 0.6% in December, an unexpected decline, after rising 0.8% in November.

This indicates the economy lost momentum at the end of 2018 (we’ve already seen disappointing retail sales and home sales figures for December).

For 2018 as a whole, construction spending rose 4.1%, the weakest reading since 2011.

Soybean, corn and crude oil prices have all jumped today too, thanks to trade war optimism.

Dr. Heather Skipworth, senior lecturer in logistics, procurement and supply chain management at Cranfield School of Management, has a good take on the raw materials shortage gripping UK construction:

“A Supply Risk Report, due to be published by Dun & Bradstreet and Cranfield School of Management later this month, has found an uncharacteristically high dependency on suppliers in the construction sector with a 40% increase in ‘supplier criticality’ in Q4 of 2018.

More than 80% of relationships analysed for the report were classified as critical or key, indicating a high reliance on current suppliers and a high level of exposure to supply chain risk.

The report also found the sector had a very low foreign exchange risk (1.6%), suggesting that construction companies are choosing to work with vendors based in the UK to sidestep Brexit uncertainty.

Over in New York, stocks have opened higher as Wall Street responds to the latest trade war optimism.

The Dow Jones industrial average has gained 106 points, to 0.4%, to 26,132. That’s close to last week’s three-month high.

This follows the rally in Asia, which took the Shanghai index to a nine-month high. European stock markets are now at their highest level in five months.

Traders are encouraged by the overnight reports that the US and China are closing in on a deal that could lower tariffs on each others exports, and see Beijing provide more intellectual property protection.

But...some analysts are urging cautious, as there’s no confirmation that real progress has been made.

Also, while ending the trade war would be welcome, Ned Shearing of Capital Economics says the good news is already priced in.

Shearing also thinks the recent slowdown can’t all be blamed on the US-China trade spat.

The fact that a full-blown trade war between the world’s two largest economies appears to have been averted is clearly a good thing. But the abrupt ending of talks between President Trump and Kim Jun Un last week serves as a timely reminder that enthusiastic briefing ahead of summits doesn’t necessarily translate into policy action.

More fundamentally, even if a deal between the US and China on trade is ultimately agreed we don’t expect that a trade truce will now provide a substantial shot in the arm to the global economy.

Back in Greece, former EU commission president Jose Manuel Barroso has admitted that both sides made mistakes in the country’s debt crisis.

Attending the annual Delphi Economic Forum at the weekend, Barroso said Greece had come “very close” to exiting the euro zone at the height of its debt crisis.

“Greece came very close to Grexit,” he told the yearly economic gathering Sunday acknowledging that Athens also suffered because financial instruments had not been created to deal with a crisis of such magnitude.

“There were mistakes from the Greek side but also from the European [side] too. Some countries should have been more generous and shown greater solidarity.”

Barosso added that the reaction of Greeks to the tough terms set out in the bailout programmes (strikes, protests...) had not help inspire confidence in European governments.

Construction firms aren’t the only ones suffering from Brexit, of course.

Across the company, companies are stockpiling goods (locking up precious capital), and scrutinising their legal position in case Britain crashes out of the EU without a transition agreement

Nicole Sykes, CBI Head of EU Negotiations, reports that UK PLC is increasingly anxious, and unhappy.

Investors across the eurozone are feeling more optimistic - or at least less pessimistic.

Research group Sentix has spotted a “ray of hope” in its latest assessment of investor confidence. Its morale index has risen to -2.2 this month; a fairly poor reading, but better than February’s -3.7.

The German thinktank’s ‘current expectations’ index fell for the 7th month running, but this was balanced by a rise in the ‘future expectations’ index. That may signal that prospects are improving.

Sentix says:

“It is too early to give the all clear.

However, a ray of hope emerges when looking at the economic expectations.”

In a separate piece of bad news, the company behind the Giraffe and Ed’s Easy Diner restaurants is planning to shut 27 outlets, putting hundreds of jobs at risk.

Boparan Restaurant Group (BRG) has announced its intention to enter a company voluntary arrangement (CVA), an agreement with landlords to try to avoid bankruptcy by restructuring debts.

The two brands run 87 restaurants, although none of the potential closures will affect the 17 restaurants run by franchisees, including those in airports.

Last December, analysts warned that closures in the industry hit “epidemic levels” in 2018, following closures at Carluccio’s, Prezzo, Jamie’s Italian and Strada. 2019 hasn’t started much better.

Britain’s struggling builders need help from the government, says economist Howard Archer of the EY Item Club.

That means some clarity over Brexit (MPs will hold crucial votes on Theresa May’s deal, no-deal, and an article 50 extension next week). It also means more support to spur on major construction projects, and housebuilding.

Here’s Archer’s take on the contraction in UK construction last month:

• Client’s willingness to commit to major new projects (particularly in the commercial sector) is currently being limited by Brexit uncertainties and a subdued domestic economy. Construction companies will no doubt be hoping that the government will push to get infrastructure projects up and running
• Additionally, house building activity is now seemingly being increasingly pressurized by extended lacklustre housing market activity and subdued prices amid challenging fundamentals. Construction companies will be hoping that the various measures that the government has taken aimed at lifting new house building to 300,000 a year will ultimately prove to be genuinely effective.
• If the UK does ultimately leave the EU with a “deal” at the end of March, construction companies will hope that this reduces uncertainty and increases client willingness to commit to major projects.

On the employment front, some building firms have decided not to replace staff who have left - due to concerns about the business outlook.

Others. though, say they took on trainees to cover skills shortages. That might be due to the drop in EU migration since the Brexit vote.

Economist Rupert Seggins shows how UK civil engineering and commercial property construction both contracted last month (dropping below the 50-point mark on the monthly PMI index).

That is a clear sign that companies are holding off from committing to major projects until they have clarity over the UK’s future.

Jonathan White, UK head of infrastructure, building and construction at KPMG, says times are tough for UK builders.

“Construction firms have their heads down in contingency planning for every outcome, but what this means for the long-term health of the sector is uncertain. It seems as though many businesses are in defensive mode and do not have the confidence or clarity to make future plans.

Britain’s construction could soon be dragged into recession, fears Markit’s Chris Williamson.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, says Brexit is hurting UK builders -- by spooking clients, and creating shortages of key materials.

Commercial and civil engineering activity was pushed into the red, as client uncertainty over placing new orders left its mark. This meant the relatively weak residential building sector was the best performer. However, with consumer confidence also waning, housing is likely to follow suit in the coming months.

The domino effect of stockpiling by other sectors such as manufacturing impacted on supplier performance, as builders competed for dwindling supplies of raw materials, while transportation availability also became a problem, leading to supply chain bottlenecks. This meant that purchasers were subjected to the second- longest delivery times since March 2015, affecting work already in-hand.

Get your diaries out. A US-China trade deal could be signed by presidents Xi and Trump on 27 March.

China is reportedly even offering to buy 50 million litres of Jack Daniels whiskey, to help smooth a trade deal.

That’s a canny idea, politically. Jack Daniels is one of the US products targeted by Beijing last year when it announced retaliatory tariffs against American goods - hurting farmers in the Tennessee region.

America’s whiskey industry had seen China as a key growth market, before the trade war burst into life last year. Sales of single malts surged by a third in 2017, so US whiskey makers won’t want to be locked out. Trump will be keen to give them a win.

Your whiskey mileage may vary, of course, but City experts (who can afford the good stuff) suspect China should set its sights a little higher....

China’s parliamentary spokesman Zhang Yesui says Beijing hopes to achieve a ‘win-win’ trade deal with America.

Zhang told reporters that officials have conducted “fruitful and intensive consultations and made important progress on many issues of common concern.”

He added:

“We hope that the two sides will continue to hold consultations and reach a mutually beneficial and win-win agreement.”