Stock markets recovered yesterday, following on from the previous day’s hammering on global trade war worries.
Investors remain on edge about a damaging standoff between the United States and China, with US President Donald Trump threatening tariffs on a further $200bn of Chinese goods.
The EU yesterday slashed its growth forecast for the eurozone for this year, warning that the rising trade tensions with Washington were hitting the economy.
The European Commission, the EU’s executive arm, said the 19-country single currency bloc would expand by 2.1% in 2018, lower than the 2.3% forecast just two months ago.
“Many agree that tariffs will ultimately be bad for the global economy, and therefore markets, but there still seems to be some hope that common sense will prevail and a full blown trade war will be averted,” noted Craig Erlam, senior market analyst at Oanda trading group.
The Dow firmed during the New York morning, in turn helping European indices post solid gains at the close.
In Europe, London’s FTSE 100 was up 0.8% at 7,651.33 points, Frankfurt’s DAX 30 gained 0.6% to 12,492.97 and Paris’s CAC 40 was up 1% to 5,405.90 points at close yesterday.
Asian markets also firmed earlier, with Japan’s Nikkei given an extra nudge by a weaker yen, which helps the country’s exporters. Despite the currency’s popularity as a haven investment, the yen is at a six-month low against the dollar, which is winning support from a robust US economy.
The Federal Reserve is “more concerned about the (US) economy overheating right now than the prospect of a trade war”, Erlam added.
Strong US economic data suggest that Washington is in a much stronger position to fight a trade war with China, which is battling slowing growth and a crippling debt mountain among other things.
“Even though concerns remain over US-China trade frictions, the dollar remains stronger (against the yen) as traders believe there will be a political settlement at some point to avoid an all-out trade war,” FX Prime trader Marito Ueda told AFP.
Shares in Chinese telecoms equipment maker ZTE cruised 25% higher as the company moved a step closer to having US sanctions lifted by signing an agreement to put $400mn in escrow to cover any future violations.
The move comes after it agreed to pay a $1bn fine and make the escrow placement in return for the lifting of a seven-year ban on US firms selling to it, which had put it on the edge of collapse.
Back in Europe, shares in Norwegian surged after the low-cost airline surprised markets with a profit in the second quarter amid expectations of a sizeable loss.
On oil markets meanwhile, the main contracts went negative again after diving by up to 7% on Wednesday when Libya said it had resumed exports from four eastern ports following a disruption caused by clashes in the war-torn country.
Global oil supply, driven by crude giants Saudi Arabia and Russia, may meanwhile come under pressure as a number of key producers face disruptions, the International Energy Agency said yesterday.
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