Business World

Wednesday 18 September 2019

Markets breathe again after trade meltdown

Markets Report

Traders work on the floor at the New York Stock Exchange. Photo: Reuters
Traders work on the floor at the New York Stock Exchange. Photo: Reuters

Calm returned to stock markets yesterday as softer rhetoric from Washington on the US-China trade war soothed investors, though demand for safe-haven assets like government debt underscored lingering anxiety over recession risks.

By mid-afternoon, Europe's STOXX 600 climbed 0.9pc as deal-making in the chemicals sector also helped it claw back ground after a bruising three-day sell-off prompted by rising tensions between Washington and Beijing.

MSCI's world equity index, which tracks shares in 47 countries, also rose 0.2pc. It had suffered its worst day in 18 months on Monday.

But gold soared to a six-year high and benchmark government debt from Germany to the United States was in high demand as money still headed towards safe-haven assets.

Even as relative calm returns, bond markets in particular have benefited from fears the trade war could spark a global slowdown and bolster the case for looser monetary policy.

US shares had gained overnight after President Donald Trump downplayed worries of a lengthy trade war and senior adviser Larry Kudlow said Mr Trump's administration plans to host a Chinese delegation for talks in September. Wall Street futures gauges also rose.

The US administration's remarks marked a shift in tone from recent days, when Beijing warned that Washington's labelling China as a currency manipulator on Monday would have severe consequences for the global financial order.

Still, market players voiced caution. Mr Trump's threat to impose additional tariffs on more Chinese products is set to take effect in less than a month.

"There is some cautious buying creeping back in," said Michael Hewson, chief market strategist at CMC Markets. "But if you want that to be sustained you have to look towards September 1, when the new tariffs kick in, and whether or not Trump presses ahead with them."

Bank of Ireland however bucked the higher trend. Its shares were down 3.7pc at €3.49 while AIB was 0.56pc lower at €2.834.

Germany's 10-year bond yield fell to record lows deep in negative territory as weak German economic data fuelled further a rally in bond markets.

Reuters

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