‘If Trump can hit China where it hurts, and prompt capital flight out of the country, even China’s big holdings of US Treasuries may not help’
Chris Beauchamp, chief market analyst at IG –
‘Europe is taking time to play catch-up with the US, after the Dow endured a stomach-churning plunge yesterday. Compared to the prospect of a trade war between the world’s two most important economies, the travails of Facebook are a distraction, but the seemingly growing pile of bad news has sent investors fleeing to safe havens.
‘In a worrying sign, the overnight bounce in the futures is already beginning to fade, indicating that momentum is taking over once again. There is reason for optimism even now however. A look at the tariffs imposed by the US, and, crucially, the exceptions, shows that Mr Trump is open to negotiation. Key allies have been excluded, and the steel tariff is a red herring – what matters is the battle over technology and intellectual property.
‘If Trump can hit China where it hurts, and prompt capital flight out of the country, even China’s big holdings of US Treasuries may not help. Between now and then however, we may still see a lot more volatility. Still, these kinds of opportunities do offer the chance for patient investors to go bargain hunting, and it will be interesting to watch which sectors do well today, as a sign of possible recovery.