European equities took a hit on Wednesday, following Asia lower as fears about the US economy and China trade-war jitters gripped markets.
In the US, the Nasdaq and S&P 500 each tumbled more than 3.2% amid growing doubts that a trade deal could be thrashed out between the US and China. A wonky indicator called the “yield curve” also flattened, signaled a weaker outlook for economic growth and fears about a recession.
President Donald Trump on Tuesday threatened to place “major tariffs” on Chinese goods entering the US, demolishing an uplift in market sentiment after last week’s G20 summit in Argentina.
The Shanghai Composite index closed down 0.6% Wednesday. European shares followed, with the Euro Stoxx 50, Germany’s DAX and France’s CAC all down 1%. Fears remain that a US-China trade deal will not be struck in the 90-day negotiating window agreed by the two sides.
Some analysts suggested that Monday’s gains were overdone, given Trump’s previously barbed comments.
A minor relief rally in US index futures may be masking continued market uncertainty amid the longest bull market since the depths of the financial crisis.
“There is a strong chance now that the buy the dip mentality has flipped into a sell the rally approach,” said Neil Wilson, chief markets analyst for markets.com.
Oil investor sentiment tracked that of equities. Brent crude is down 1.6% as of 8.45 a.m in London (3.45 a.m EST) as renewed uncertainty about the substance of potential supply freezes or cuts from Saudi Arabia lingered on markets ahead of OPEC’s summit in Vienna on Thursday.