European and US stock markets recover despite trade war rhetoric

European and US stock markets recovered slightly yesterday, despite Beijing ratcheting up its rhetoric against Washington as the US-China trade war rattles on.
London’s FTSE 100 closed 0.5% up at 7,218.16 points, Frankfurt’s DAX 30 ended 0.5% higher at 11,902.08 points and Paris’ CAC 40 finished gaining 0.5% at 5,248.91 points, while the EURO STOXX 50 added 0.6% at 3,317.17 points at close.
The dollar rose against the euro, with the European single currency continuing to take a knock from increasing concerns over Italy’s debt mountain.
“Today has seen US and European markets take a welcome reprieve from the incessant selling that has dominated much of this week,” said IG market analyst Josh Mahony.
US stocks dropped on Wednesday to their lowest level in ten weeks on a heady mixture of trade war worries and growing concerns over the state of the US economy.
But David Madden at CMC Markets UK said “the move feels hollow as political and economic relations are still strained” between the United States and China.
Meanwhile, Wall Street pushed higher as the downward revision of US GDP growth in the first quarter from 3.2 to 3.1% was better than expected.
Briefing.com analyst Patrick O’Hare said that nothing had improved on the US-China trade deal front to foster a positive bias.
“The improved tone, then, is being driven predominately by a sense that the stock market seems primed to bounce from a short-term oversold condition,” he said.
Global stock markets had largely slumped on Wednesday on the latest salvos in the US-China trade war.
With no date set for talks to resume, and Beijing accusing Washington of “naked economic terrorism” yesterday in its handling of the dispute, investors appeared resigned to the prospect of the dispute extending into the coming months.
“We are against the trade war, but we are not afraid of it,” Chinese vice foreign minister Zhang Hanhui told a press briefing.
“This premeditated instigation of a trade conflict is naked economic terrorism, economic chauvinism, and economic bullying,” Zhang added.
A veiled threat by Beijing on Wednesday to cut critical exports of rare earth minerals to the United States intensified concerns.
It was the latest salvo in a months-long row that has seen Washington and Beijing slap tit-for-tat tariffs on imports, with US President Donald Trump upping the ante in recent weeks by blacklisting Chinese telecom giant Huawei.
Any move by China, which produces 95% of the world’s rare earths, to restrict exports to the US would have a devastating impact on manufacturers of everything from smartphones to computers to light bulbs.
In Asian stocks trading yesterday, Tokyo and Shanghai ended 0.3% lower while Hong Kong dropped 0.4%.
In bond markets, a push towards haven purchases has seen the yield, or rate of return, on 10-year US Treasury notes plummet to the lowest level since September 2017.
Investors were also worried about short-term yields rising above those for 10-year debt, which is seen as a sign of an impending recession.