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Equities, oil rebound as trade war fears persist
LONDON, July 13, 2018 (BSS/AFP) – Stock markets recovered Thursday,
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 $200 billion of Chinese goods.
The EU on Thursday slashed its growth forecast for the eurozone for this
year, warning that the rising trade tensions with Washington were hitting the
economy.
– Common sense? –
The European Commission, the EU’s executive arm, said the 19-country single
currency bloc would expand by 2.1 percent in 2018, lower than the 2.3 percent
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.
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.
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– Oil drops –
Shares in Chinese telecoms equipment maker ZTE cruised 25 percent higher as
the company moved a step closer to having US sanctions lifted by signing an
agreement to put $400 million in escrow to cover any future violations.
The move comes after it agreed to pay a $1 billion 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 seven percent 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 Thursday.
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