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This week’s risk sentiment was eroded by today’s announcement from China of retaliatory tariffs on another $75b worth of U.S. goods. Global stocks recovered from the drop of last week as strong U.S. retail earnings and hopes of a more stable government in Italy outweighed the escalation of trade tensions.
Yesterday’s risk appetite was hurt by the volatility in the financial markets amid concerns over global economic weakness and renewed U.S.-China trade tensions. All eyes will be on Powell’s speech tomorrow at the Jackson Hole gathering as markets look for hints on monetary policy.
Markets regained risk appetite amid some positive news on the trade front, better-than-expected earnings in the U.S. retail and hopes of a more stable government in Italy. Investors will closely watch today’s Fed minutes for better insight on the decision to cut rates last month.
Investors traded cautiously, awaiting more clues concerning monetary policy. Safe-haven assets outperformed others, with sovereign bonds rallying.
August 19, 2019
Market Comment | Stock markets climbed as fears of trade war and global slowdown ease
A cautious optimism prevailed in financial markets driven by positive news on the trade front and hopes of monetary and fiscal stimulus, outweighing fears of a global slowdown.
Yesterday’s upward move spurred by some positive news in the trade front faded. Stock markets fell and government bonds resumed their rally as weak economic data from Germany and China renewed investors concerns on global economic growth.
Early cautiousness driven by the gloomy German economic outlook dissipated after the Trump administration stated that it will delay the 10% tariff on some Chinese imports until the end of the year. Equities picked up while sovereign bond yields were mixed.
Markets remained cautious with the U.S.-China trade conflict showing no signs of abating, spurring fears over global growth and currency volatility. Trump downplayed expectations of holding a trade meeting with China in September. In this context, safe-haven assets remained in demand.