Equities slide on trade war concerns — 'This market is trading on the whimsy of Donald Trump'

  • European equities and US futures fell on Wednesday as investors worried about the trade war.
  • Asian stocks rallied on renewed potential for a trade deal and Chinese government stimulus.
  • President Trump said a trade deal “could absolutely happen,” while Beijing might pump more yuan into the economy to combat slowing growth of retail sales and industrial production.

European equities and US futures fell on Wednesday as investors worried about the US-China trade war. Asian stocks rallied on renewed hopes for a trade deal and the prospect of further Chinese government stimulus.

Trump told reporters on Tuesday that the trade war was a “little squabble” and a deal “could absolutely happen,” according to CNN. The president’s positive rhetoric came after he accused China of sabotaging a potential trade deal and hiked tariffs on $US200 billion of Chinese imports last week, leading the Asian nation to retaliate with duties on $US60 billion of US imports.

Meanwhile, disappointing domestic data could prompt the Chinese government to inject more money into the economy. Retail sales rose 7.2% in April, undershooting forecasts and growing at their slowest rate in 15 years, according to Reuters. The decrease may worry investors in fashion stocks, which were sold off this week on fears of higher import and export costs and weaker Chinese demand.

Chinese industrial production rose 5.4% in April, a sharp pullback from 8.5% growth in March which was its fastest increase in more than four months, according to Reuters.

“These figures show that the Chinese economy is losing steam,” said Jasper Lawler, head of research at London Capital Group.

Following the president’s reassurances, markets are “behaving a little more sensibly,” said Neil Wilson, chief market analyst for Markets.com.

However, “the problem right now is that this market is trading on the whimsy of Donald Trump all the time, which makes it a tough place to be,” Wilson added. “One can only say that we should expect more volatility ahead and more shaking of the tree from Donald Trump.”

Here’s the market roundup as of 10.10 a.m. (5.10 a.m. ET):

European equities opened lower with the Euro Stoxx 50 down 0.3%, France’s CAC 40 down 0.3%, and Germany’s DAX down 0.2%. Britain’s FTSE 100 inched up 0.2%.

US stocks are set to open marginally lower. Futures underlying the Dow Jones Industrial Average and S&P 500 were down less than 0.1%, while Nasdaq futures were almost flat.

Asian indexes closed higher with China’s Shanghai Composite up 1.9%, Japan’s Nikkei up 0.6%, and Hong Kong’s Hang Seng up 0.5%.

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