Thursday, 5 July 2018

Trade tensions “on the cusp of doing serious damage”

Markets were mixed on Wednesday.

The STOXX Europe 600 rose less than 0.1 percent while the Nikkei 225 fell 0.3 percent. The US stock market was closed for a holiday.

“There is still an underlying concern over global trade tensions, but for now there is a degree of consolidation setting in,” said Richard Perry, market analyst at Hantec Markets, in a note.

However, things could still get a lot worse. Economists at Deutsche Bank estimate that a full-blown trade war could shave off 1 percentage point from gross domestic product.

“It’s on the cusp of doing serious damage,” said chief economist Steve Blitz of TS Lombard.

France’s Council of Economic Advisors is even more pessimistic. It has estimated that the US and China could see a permanent loss of three percent of economic output and the European Union four percent in the case of a full-blown trade war.

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