European update – Risk aversion remains

Markets back in the red as tariffs increased

European markets are mostly lower at the start of the week and the US is expected to open even deeper in the red after talks between the US and China broke down and tariffs were increased.

Source – Thomson Reuters Eikon

The talks appeared to be going quite smoothly until a week ago when the cracks started to appear, since when markets have given up a chunk of their first quarter gains. There is still some hope that a deal can be reached, with a possible meeting at next month’s G20 being touted between Trump and Xi in an attempt to break the impasse.

It will now be interesting to see just how much conviction there is in the first quarter rebound, with the prospect of a Sino-US deal a big contributor to the improved sentiment in the markets. Of course, there were other important factors as well and central banks have made a significant effort to alleviate those concerns but trade tariffs are a major concern at a time when global growth is already expected to slow.

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.