European update – Trade fears not disappeared

Markets pare recent losses but remain vulnerable

Markets are taking a breather on Thursday, with US futures paring recent declines although traders remain very concerned about recent trade war developments.

Source – Thomson Reuters Eikon

The recent declines we’ve seen in equity markets will no doubt be a concern for investors, worried about the prospects for the global economy when tensions between the world’s two largest economies are becoming heightened. The latest reports relating to Chinese threats on rare earth minerals represent another potential escalation in the crisis and highlight how technical the threats will now become as we move on from tariffs alone.

The Trump administration must be concerned about the toll this is taking on the markets. The sell-off we’ve seen this month may not be too extreme – just shy of 6% at the close yesterday – but as we saw in the fourth quarter of last year, it could get much worse.

The impact recent events are having on the yield curve both highlights the risks investors associate with events and further feed into the doom loop as investors become increasingly wary about the risk of a recession.

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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.