Thursday, 9 August 2018

Markets fall amid escalating US-China trade dispute

Markets fell on Wednesday.

The Shanghai Composite tumbled 1.3 percent after the US confirmed it would impose 25 percent tariffs on US$16 billion in Chinese imports later this month. China subsequently countered with additional tariffs of 25 percent on US$16 billion worth of US imports.

The STOXX Europe 600 fell 0.2 percent while the S&P 500 was marginally lower.

Oil plunged 3.2 percent.

Sean Darby, chief global equity strategist at Jefferies, noted that while the trade dispute between the US and China “have not noticeably impacted overall growth”, negotiating positions have become “much more entrenched” and it is likely that “the dispute will run beyond the November US midterm elections”.

Even if the trade dispute is resolved though, markets may not be safe.

Ned Davis Research's chief US strategist Ed Clissold thinks there is a high probability a record year-end rally will give way to a painful 2019.

“You could be looking at the first 20 percent-plus decline in the S&P since the financial crisis,” he said, citing unsustainable earnings growth.

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