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Financial markets rattled for the third straight day as US-China trade tensions festered ahead of crucial negotiations between high-level officials in Washington, starting today. Trump’s rebuke that ‘China broke the deal’, accelerated the sell-off in equities.
The 'risk-off' mood persisted across markets today as global growth concerns mounted in the wake of escalating US-China trade conflict, downbeat China exports data, and a flair-up in geopolitical tensions in the Middle East with Iran poised to breach parts of the nuclear deal.
Caution prevailed across financial markets, as US-China trade tensions ratcheted up further today. The slight downward revision in Eurozone growth forecast by European commission did not help either. Safe-haven bonds continued to attract fresh demand, while equity markets declined.
Risk-off mood in financial markets. Trump’s threat to introduce further tariff barriers against China took a heavy toll on equity markets today, boosting flows towards safe-haven bonds, amid mute inflation pressure.
Safe-haven bond yields increased and equity markets retreated from their recent highs, while bond investors searched for an extra-yield, in turn, narrowing peripheral and HY spreads, as Fed Chair Powell guided markets to a neutral stance on interest rates.
Financial markets were calm today, ahead of tomorrow’s FOMC meeting, and today’s mixed signals - reassuring Eurozone GDP growth, softer Chinese PMI outturns and cautious company earnings results.
April 29, 2019
Market Comment | Financial markets hold steady ahead of an eventful week (FOMC preview)
Financial markets were broadly stable ahead of an eventful week, marked by the upcoming FOMC meeting, 1Q19 Euro area GDP growth outturn, alongside Chinese PMI and the US labor market figures.
Demand for safe-haven bonds increased after inflation pressures moderated in the US during Q1 2019 amid lack of compelling growth signals, and rising vulnerability concerns for EM economies in the wake of USD strength.