European update – Edging lower as US open nears

Markets stable as Trump reassures Wall Street

The markets are gradually edging deeper into the red on Wednesday, with investors having earlier appeared soothed by the calming words of Donald Trump who sought to reassure us all that the trade war with China is merely a little squabble.

Source – Thomson Reuters Eikon

After freaking out at the beginning of the week, investors have quickly settled down and, it would appear, decided hope is more preferable than reality. Over the last week we’ve had more tariffs imposed between the world’s two largest economies and this morning Chinese data has seriously disappointed and yet, investors are calm.

It’s hard not to think that Trump had an eye on Wall Street when he made the latest comments on China, with those previously that contributed to the decline, having been far harsher. Still, those soothing tones appear to have worked for now, the only question is how long it will last.

Already Trump has sought to divert attention to the central bank once again, claiming that if they only cut interest rates, the trade war would be won. That of course is not the job of the central bank and a prime example of why it is independent but it will be a convenient target should the economy take a turn and the trade war drag on into 2020 when the President has an election to contend with.

Gold bulls feeling more confident

Gold continues to hover around $1,300 and the recovery in investor sentiment since Monday took some of the shine off the rally. With risk appetite in the markets still uncertain and investors potentially feeling a little vulnerable following Monday’s moves – not to mention the prospect for more tariffs – gold bulls may be feeling a little happier than they were a week or so ago.

Gold Daily Chart

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam