European update – Back in risk aversion mode?

Markets in the red as trade concerns remain

It’s been a bizarre week in the markets, one that looks set to end on a negative note in a potential sign that investors are not particularly comfortable despite a three day winning streak.

Source – Thomson Reuters Eikon

The week got off to a woeful start after China announced counter-tariffs against the US as trade talks broke down. Markets had been surprisingly resilient at the end of last week when the US announced its tariff increase on $200 billion worth of goods but once China followed, all hope quickly disappeared as investors prepared for more friction and further tariffs.

Trump then succeeded in calming investor fears, claiming the fallout was just a mere “little squabble” between the world’s two largest economies before then offering further hope to investors as reports claimed auto-tariffs may be delayed by six months. Clearly the prospect of fighting a trade war on multiple fronts isn’t too desirable, particularly heading into an election year.

That proved enough to settle investors and markets have recovered since Monday but I wonder whether futures trading in the red heading into the weekend is a sign they’re not entirely convinced. A lot can happen while the markets are closed and we clearly live in uncertain and uneasy times. If this is to last, we’ll need to see more evidence that the situation can lead to a positive conclusion but for now, talking a good game looks to be doing the job.

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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.