Stock markets collapsed after the failure of the US negotiations with China

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After Washington refused to resume trade negotiations with Beijing, the scene returned to fears over the escalation of a trade war. On Friday, the yuan fell to 10-year lows, which led to a new wave of sales in the stock markets of Asia. European markets opened on a decent decline. In leaders of falling – the German DAX 30 and French CAC 40. Both the benchmarks losing more than 1%. In the markets of the Old world common fears are complemented by concerns about Italy.
Tonight the S&P will present its rating of the third largest Eurozone economy. The yield spread of bonds of Germany and Italy around 300 b.p. and the downgrade by the Agency only expand it, increasing the pressure on the Euro. So, most likely, updating the lows of 2018 in EUR/USD is only a matter of time. As long as the quotes are trying to recover and mark the level of 1.14.
Another important event for global markets in General and the dollar in particular will be the publication of the first estimates of US GDP for the third quarter. Forecasts vary widely, accompanied by high uncertainty. It will be interesting to observe the reaction rate on the release. If the economic growth will slow within the average forecast, the dollar will continue to face.
The Russian stock market is falling in early trading, reflecting the situation on the international markets. Index Mosberg and RTS are losing an average of 1%, and the situation may worsen if foreign investors continue to flee risk, and the oil will not return to growth.
The ruble strengthened moderately against the currency basket in anticipation of the verdict of the Bank of Russia. After last month, the regulator unexpectedly raised rates by 0.25% to 7.5%, market participants do not expect changes in monetary policy, assessing the current level of rates as an equilibrium. However, the players will follow the statements of the Central Bank in the context of the risk of sanctions and the prospects for policy control. For the ruble, this event will be significant and is unlikely to have a significant impact on his mood during the day.
Nathan Lambert
Head of research,
Global FX