European stock exchanges limit losses, spread slightly up

The escalation of the trade war between the US and China by means of increased duties is putting pressure this morning also on the European stock exchanges, even if with smaller losses compared to those recorded in Asia. The Ftse Mib in Piazza Affari fell by 0.06% (to 20,461) while Paris opened at -0.15%, Frankfurt at -0.21% and Madrid at -0.4%. The sell-off instead saves London, which today remains closed for bank holidays.

At Piazza Affari Intesa Sanpaolo resisted with a marginal drop of 0.09% to 1.90 euro while Unicredit gave up 0.3%. Mediaset loses 0.7% in the beginning after Vivendi has filed a complaint to preserve the voting rights in the meeting Mediaset. Among the worst shares on the list are Monlcer (-1.57%), Bper (-1.35%) and Prysmian (-1.28%).

The increase in duties by China, announced last Friday, and the response of U.S. President Donald Trump is putting pressure on equities and global bond yields, increasing instead the indicator of volatility. Yesterday at the French G-7 summit, Trump reported that he regretted not having increased tariffs on the Asian country’s goods more significantly so far. Wall Street closed Friday’s session in sharp decline, with the Dow Jones losing 2.37%, the S&P 500 2.59% and the Nasdaq Composite 3%.

On the other hand, the escalation of the trade war on the markets, which exacerbates fears of a global recession, is triggering a race for refuge goods, with gold soared this morning to $1,543 an ounce from $1,495 on Friday, while U.S. government bond yields plummeted. The cost of financing the 10-year T-Note, specifically, reached 1.4795%.

Trump announced in the night between Friday and Saturday its retaliation against China, which a few hours earlier had said it will impose new duties at a rate between 5 and 10% on 75 billion U.S. dollars of imports (of which a part will come into force from September 1 and the second from December 15, plus a 25% of new taxes on auto parts) in response to those U.S. that will start on September 1 on 300 billion dollars of Chinese imports.

On Twitter Trump has declared that from October 1 the American duties of 25% already in force on 250 billion dollars of Chinese imports will rise to 30%. In addition, the duties that will be imposed from September 1, decided at the beginning of this month, will be 15% and not more than 10% as previously expected.

Meanwhile, it should be noted that a partial opening came from the Chinese Vice Premier, Liu He, the main trade negotiator in Beijing, who said that China wants to continue trade talks with the United States after the new bilateral tensions. “We are willing to solve the problems through negotiation and cooperation in a calm manner,” said Liu according to the Chinese state media.

The Beijing government “is firmly opposed to an escalation of the trade war” as it damages the interests of China, the United States and the world, Liu said.

On the macro front, Germany’s August Ifo index, expected at 10:00, is holding its ground today. Attention also to the preliminary orders of durable goods of July Americans on the agenda at 14:30.

In the currency the euro remains stable against the dollar and this morning opened above 1.11 to 1.1144, the same price on Friday evening, while the offshore yuan recorded new lows in Asia, reaching 7.1649 against the dollar, the lowest level since February 2008.

In the bond market this morning the Btp-Bund spread opened stable in the area of 200 basis points, slightly higher than the 199 points at the end of Friday, despite the political tensions in view of the choice of the new Italian premier. While waiting for the evolution of the government crisis, on the eve of the second round of consultations at the Quirinale, the yield of the ten-year BTP is rising to 1.314%.

No significant auctions are also planned for today, with Italy and Germany starting to place government bonds again in the coming days after the summer break. (reserved reproduction)

Cody Benson

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