Stock indices are weaker across Europe after early trading with the auto sector under pressure on fears of the increased tariffs into the US market. A meeting today between US President Trump and EU Commission President Junkers to discuss the trade issues will be watched closely but expectations are low for any breakthrough.
European investors are keen to buy into shares after strong earnings from internet giant Alphabet - parent of Google - and improved sentiment after China added large amounts of liquidity to market and commented that they were not interested in any currency war with the US. The Chinese currency has weakened from highs last week.
European investors are a bit nervous in todays session with concern about the ongoing trade disputes between the US , China , Europe , Canada and Mexico still evident. Industrial metals including Copper continue to show weakness with global economic growth and industrial production under threat from this increased protectionism.
European investors are pushing up stock indices in a follow up to solid price action in the past few sessions. The US Dollar is also performing well as trade concerns fuels demand. Comments by Trump that the US/UK trade deal may be doomed has put some pressure on the GBP and also the EUR.
European investors have been transfixed by Trump and what he might say to NATO at recent summit. His initial comments that Germany was "captive to Russia because it purchases large amounts of oil and gas" and that he didnt see a place for NATO have been tempered today in a final Press Conference where he said NATO had never been stronger and that everyone was friends as long as every country paid their dues.
An escalation in the trade war between the USA and China has pushed the market back into defensive positions with stocks lower , bond yields lower , and the US dollar gaining strength.
European investors continue to put aside concerns with trade and political issues and instead focus on the upcoming corporate earnings and economic data. Talk over the past week from ECB members that Europe is strong enough to begin winding back some of the huge stimulus package has improved the overall sentiment.
Investors in Europe have put aside concerns about a global trade war and focused on the strong economic data in the US and Europe with stock indices stronger , the USD weaker which is helping commodities , and bond yields stable. Oil prices have moved higher on the potential reduction in supply from Iran due to US sanctions.
The Trade war has gone live overnight with both the US and China placing tariffs on each others imports to the value of US$34 bn. Investors are mainly worried about an escalation because Trump has threatened China with up to US$500bn , and China has said that it will not lead but it will react to anything that the US does. China and Europe have also threatened to take the US to the WTO. Europe has been focused on the tariffs on car imports to the US and maybe this can be sorted by reducing the European tariffs on the US cars. Stock indices in Europe were higher last night due to the improved auto sector.
Stronger economic data in Europe and the UK yesterday and a sign from the PBOC that they will try and stem the fall in the Yuan has improved the sentiment in most markets. Investors are still concerned about the ever increasing trade tensions between the US , China , Europe , Canada and Mexico but perhaps the fallout in the financial markets will not be as great as feared.