The so-called “stock market bloodbath” has continued on Friday with major indices falling down to the lows of the last October. What's going on?
ECB: European equities would suffer more in a global trade conflict
EU equities would suffer more than their American rivals in case of a full-fledged global trade clash. However, emerging markets would most likely take a bigger hit. That’s what follows from the research uncovered by the European Central Bank on Tuesday.
This year, trade tensions have strengthened because America slapped a bunch of protectionist measures, mostly duties on China, thus increasing the risk of an escalation, which could drive an already notable deceleration in global trade.
American equities would dive by nearly 10% and American corporate bond spreads would head north by 100 basis points in the first year, as the ECB pointed out, illustrating that scenario as 25% import levies slapped by all countries on each other.
The ECB added that in the euro area, stock prices would dive by nearly 15%, while corporate bond spreads would inch up by up to 150 basis point in the first year.
However, emerging markets would dive over 20% in share prices.
European equities have edged down nearly as much as their American rivals after the announcement of a bunch of protectionist measures, as follows from the research. If the tensions worsened, although remained restricted, those symmetrical price dives would probably resume.
Earlier this year, equities sank by 7% on both sides of the Atlantic around major announcements of protectionist measures, and the dink accounted for 12% for companies specifically hit by the announcements.
The symmetric reaction between America and the euro zone actually suggests that financial markets consider lifts in levies to be a lose-lose situation for all sides, as follows from the research.
The explanation for this is probably the anticipated retaliation along with second-round effects, mostly interpreted as a lose-lose situation for the world’s economy, as the research states.
Besides coronavirus, other news has been driving the stocks of Apple, Wallmart and General Motors to the lower levels.
Will coronavirus continue keeping the markets in fear? What releases should we wait for? Find out in the news!
The British pound has increased in value over the course of the past week in line with an ongoing improvement in investor sentiment.
Economic activity in service sector in the Euro zone and the UK is on its lowest rates since 2009.
Jerome Powell made a rare appearance in the public media this Thursday. What did he bring to the audience?