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Global stocks largely headed south once more Tuesday with traders on edge after US President Donald Trump warned he would ramp up his trade war with China should he fail to reach a deal with Chinese leader Xi Jinping at upcoming talks.
The pound meanwhile suffered after Trump warned Prime Minister Theresa
May’s EU divorce agreement could hamper the chances of a trade deal between Washington and London, agency reports.
Oil prices steadied after recent extreme volatility, while bitcoin stabilised around $3,650.
Monday witnessed a global markets rally, fuelled by rising oil prices, Italy’s softer tone in its budget standoff with Brussels and May’s Brexit agreement with the European Union.
“A strong, sharp move higher in global equities faded almost as quickly as it occurred… in what is a clear sign of the growing sensitivity to this (trade) matter heading into the G20 meetings later this week in Buenos Aires,” noted David Cheetham, chief market analyst at traders XTB.
“Comments from US President Trump… that downplayed the chances of a US-UK trade deal after Brexit have no doubt not helped the pound’s plight,”
Cheetham said, adding that further pressure was coming from May’s struggle to have the Brexit deal approved by the UK parliament. Elsewhere, traders are looking to see if China and the US will be able to work out an agreement that brings them back from the brink of a tariffs row that threatens to dent global growth.
In a paper published Tuesday, European Central Bank researchers said that while rising protectionism’s impact on stocks and bonds has been “contained”, a global trade war risks “strong financial market corrections”.
While the Trump-Xi meeting is the main event this week, investors are also
keeping an eye on speeches from top Federal Reserve officials including boss
Jerome Powell, which could signal a softer pace of interest rate hikes.