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Stock markets slide on trade truce scepticism
Stock markets fell back yesterday amid growing trader scepticism over whether a China-US trade truce will materialise.
“The market’s post-G20 swagger proved short-lived, with Asia, and then Europe, drifting into the red as investors considered the realities of the US-China trade war truce,” said Spreadex analyst Connor Campbell.
After Monday’s initial strong gains, yesterday saw Wall Street follow an unimpressive lead from Asia which saw Tokyo shed 2% while Hong Kong and Shanghai crept barely into the green.
Some two hours into trading, the Dow Jones index was off 0.8% at 25,620.11 points and Europe similarly shed the gains of the previous day.
London’s FTSE 100 closed 0.4% down at 7,030.74 points, Frankfurt’s DAX 30 1.2% down at 11,335.32 points and Paris’ CAC 40 0.8% down at 5,012.66 points, while the EURO STOXX 50 closed 0.8% down at 3,190.07 points.
The dollar, meanwhile, weakened for a second straight day as sterling benefited from a finding by the legal advisor to the EU’s top court indicating Britain could decide to unilaterally reverse the country’s “Article 50” EU withdrawal notification.
The case was referred to the ECJ by a Scottish court and hinges on whether the British parliament could simply revoke the process.
EU countries can unilaterally end a divorce from the bloc, Advocate General Campos Sanchez-Bordona said.
Judges at the ECJ usually follow the legal opinions of the court’s advocate general and a ruling is expected as early as this month.
On the wider picture of whether Beijing and Washington can put trade tensions to bed in the short to medium term, US President Donald Trump said talks to resolve the dispute have begun already and will last for 90 days — unless they are extended.
Trump and China’s leader Xi Jinping agreed last weekend in Buenos Aires to work towards an agreement to roll back tariffs on hundreds of billions of dollars in two-way trade.
Trump tweeted an extension was possible, writing that “the negotiations with China have already started.
Unless extended, they will end 90 days” from last Saturday, when he and Xi seemed to be unveiling a truce in their tariffs war.
Lukman Otunuga, Research Analyst at FXTM, suggested that “although there seems to be a sense of uncertainty” on just what has been agreed “investors still remain cautiously optimistic over trade tensions easing in the short to medium term.”
Elsewhere, oil prices were mixed following extended recent gains fuelled by a Russia-Saudi Arabia pact to cap output.
West Texas Intermediate was down 9 cents at $52.86 per barrel while Brent Crude added 20 cents to $61.89.
Trumps trade campaign against China has led to fears that the issue will hit global growth.