European stock markets’ rebound bid fizzles out

An attempt by European and US stock markets to claw back trade-war-inspired losses yesterday lacked conviction, leaving them with little to show for their trading day.World equity markets had slumped on Monday as trade war fears took a heavy toll on valuations.Investors had a go at “battling back from yesterday’s global drop”, as Charles Schwab analysts put it, but their efforts ran out of steam with hopes for a friendly resolution of trade disputes between the US and key trading partners fading.“Nothing we’ve heard recently fills investors with any confidence that we’re going to see a de-escalation any time soon, said Craig Erlam at Oanda.“With tariffs already being implemented and US President Donald Trump promising more in retaliation against the European Union and China, it seems the situation is going to get much worse before it improves,” he said.London, boosted by a weak pound, was Europe’s best performer with a 0.6% gain at the close at 7,555.95 points, while Paris and Frankfurt were both in the red at the closing bell at 5,281.29 points and 12,234.34 points respectively.Meanwhile, the EURO STOXX 50 closed flat at 3,368.72 points.Wall Street posted small gains in the late New York morning, having earlier tested negative territory.Markets had plummeted on Monday on reports that US President Donald Trump was planning new curbs on Chinese investment in America.Trump has threatened to strike back against China’s retaliation to the US tariffs that are due to take effect July 6.Asian stocks banked sharply lower yesterday following steep falls on Wall Street, amid fear that Washington was readying a new phase in its economic confrontation with China.China was hardest hit, dropping close to 2% at the session low before paring losses later in the day.Tokyo followed the same pattern, even ending up fractionally in the black on bargain-hunting late in the day.Despite the slight bump back up, analysts warned that market sentiment remained fragile.“The market is in a really bad state. It is in as dangerous a place as it was in 2015,” said Zhang Qi, an analyst with Haitong Securities in Shanghai, referring to the 2015 market swing that saw the Shanghai index plunging more than 40% within three months.In a concrete consequence of the tit-for-tat trade blows, US motorbike maker Harley-Davidson said late on Monday it planned to shift some manufacturing overseas to avoid retaliatory European tariffs imposed last week.This sparked a furious response from Trump who said he was “surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag,” adding that he had “fought hard for them”.The EU, meanwhile, observed drily that Harley-Davidson’s decision was simply a natural consequence of a protectionist US trade policy.