Sentiment still fragile as shares struggle to look past trade fears
EUROPEAN AND ASIAN EQUITIES TREND LOWER WHILE MSCI WORLD EQUITY INDEX SLIPS 0.16%
Stock markets struggled yesterday as fears of a further escalation in the US-China trade conflict offset prospects for more bumper corporate earnings, and broader market sentiment remained fragile.
Chinese state media launched an unusually personal attack against US President Donald Trump’s trade policies on Monday, saying his trade “extortion” would not work.
The reports sought to reassure investors about Chinese economic strength as the dispute continues to rattle financial markets and raises worries about the impact on the real economy.
European shares initially followed their Asian counterparts lower — hurt by weak European bank earnings and trade fears — but a falling euro boosted exporters and helped halt the slide.
The pan-European share indexes were mixed, as were individual country markets. Germany’s DAX gained 0.22 per cent while France’s CAC 40 slipped 0.08 per cent and Britain’s FTSE 100 was flat.
The strength in German shares came despite the biggest plunge in German industrial orders in nearly 18 months. The autos sector, which has been a proxy for investors’ worries over higher trade tariffs, led the gains.
European companies including Glencore, Lufthansa, UniCredit, Adidas and Commerzbank report this week.
The MSCI world equity index, which tracks shares in 47 countries, edged down 0.16 per cent after large drops in the main Chinese indexes in Asian trading.
E-Minis for the S&P 500 were little moved, slipping in and out of positive territory.
Despite the better mood in European trading hours, the tariff conflict between the US and China remains a live and dominant theme for markets.
“In his latest Twitter tirades and his latest appearances in front of his supporters the US president has indicated something akin to a ‘strategy’ behind his trade war policy,” Commerzbank said.
“The trade war will remain in place regardless of how much the Chinese cave in.”
China proposed tariffs on $60 billion worth of US goods on Friday and a senior Chinese diplomat cast doubt on prospects of talks to resolve the row.
Trump has said his strategy of placing steep tariffs on Chinese imports is “working far better than anyone ever anticipated”, citing losses in China’s stock market. He predicted the US market could “go up dramatically” once trade deals were renegotiated. US jobs data on Friday, while weaker than expected, underlined that the world’s largest economy is growing robustly, supporting synchronised global growth that had underpinned investor sentiment before the recent eruption of the trade dispute.
Markets are increasingly nervous about whether US growth may have peaked, with concerns about rising tariffs exacerbating those fears.
“The trade war concerns are supporting the dollar and there is a bit of a risk-off tone in the markets,” said Manuel Oliveri, currency strategist at Credit Agricole.
The British pound hit 11-month lows after the UK trade minister warned Britain was headed for a no-deal Brexit.
Gold weakened on the back of a firmer dollar and was last down 0.4 per cent at $1,208.77 (Dh4,439).