Markets pare recent losses but remain vulnerable
Markets are taking a breather on Thursday, with US futures paring recent declines although traders remain very concerned about recent trade war developments.
The recent declines we’ve seen in equity markets will no doubt be a concern for investors, worried about the prospects for the global economy when tensions between the world’s two largest economies are becoming heightened. The latest reports relating to Chinese threats on rare earth minerals represent another potential escalation in the crisis and highlight how technical the threats will now become as we move on from tariffs alone.
The Trump administration must be concerned about the toll this is taking on the markets. The sell-off we’ve seen this month may not be too extreme – just shy of 6% at the close yesterday – but as we saw in the fourth quarter of last year, it could get much worse.
The impact recent events are having on the yield curve both highlights the risks investors associate with events and further feed into the doom loop as investors become increasingly wary about the risk of a recession.
