Stock markets nervous as US tariff deadline nears

Stock markets nervous as US tariff deadline nears

Wednesday, December 11, 2019

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LONDON, United Kingdom (AFP) — Key stock markets were soft yesterday and the US dollar faltered as nervousness reigned surrounding China-US trade talks with less than one week until Washington is due to impose fresh tariffs on Chinese goods.

With the December 15 deadline approaching, US President Donald Trump still has not scrapped planned levies on US$160 billion of Chinese goods, which many fear could derail the long-running talks.

“Given the market has bought into the December tariff delay in a big way, all hell could break loose if the tariffs don't get postponed,” said Stephen Innes at AxiTrader.

“Indeed, that would be a bitter pill for investors to swallow as the reality.. sets in that they have yet again been taken down the trade talk garden path only to end up at the cliff edge.”

The London equity market was also hit by official data showing the UK economy flattened in October after contracting the previous two months.

But sterling still climbed to an eight-month high at US$1.3190, one day after reaching a 2.5-year peak versus the euro.

The British currency remains well supported going into the final straight of the UK general election Thursday, with Prime Minister Boris Johnson's Conservatives tipped to win a majority that will help him drive through his Brexit deal.

The euro, meanwhile, got a shot in the arm from a closely-watched gauge of confidence among German financial players — the ZEW barometer — returning to positive territory after months in the red, although fears linger over trade tensions and an industrial slowdown.

Regarding European equities, “the Sunday deadline for further US tariffs on Chinese goods has dragged stock markets lower, with an underwhelming set of UK data... further hindering sentiment”, said Joshua Mahony, senior market analyst at IG trading group.

Wall Street was mildly lower in late New York morning trades while European stock markets ended their trading day off the worst levels seen in the morning, with Paris even managing a slight gain.

Major Asian indices had earlier closed little changed.

The consensus is that China and the US will eventually hammer out a partial pact as part of a wider trade agreement, which has fuelled a global equity rally for weeks.

However comments from both sides — optimistic and downbeat — are keeping dealers on their toes.

While the week is full of key events including central bank decisions in the US and Europe, market observers say the trade negotiations are key.

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