KUALA LUMPUR: Uncertainty and confusion around trade war are slowly but surely leading the markets down the road to financial horror, says Stephen Innes, head of trading for Asia Pacific at OANDA.
In a note to clients on Thursday, he worried that global equity markets continue to fray at the edges on the streams of negative headlines and none more so damning than a report from a Chinese government think tank.
Innes said the leaked note warned a further escalation could lead to "financial panic" on the mainland and of course the fear is that contagion could spill over from the world’s second-largest economy at a time when significant savings outside of the US are struggling on the economic front and raises the spectre more dynamic People’s Bank of China (PBOC) policy adjustments.
He said pointed out that all the while the market is voting that China will be the ultimate loser in this protracted game of high stakes poker.
Commenting on the US markets, he said stocks closed lower as confusion reigns over the US administration trade policy.
Innes said Wall Street started in positive territory as President Donald Trump walked back a previously announced plan to impose limits on Chinese investment in American technology companies only to see gains evaporate after Larry Kudlow, director of the National Economic Council, said in an interview that the Trump administration wasn't softening its stance on imposing limits on Chinese investments.
“If the administration doesn't understand what the President is trying to achieve from his trade policy, that is hardly a sign of confidence for investors.
“It would be entirely natural if investors were a bit confused as indeed confusion reigns supreme. And for traders hoping to take a summer vacation, there is no rest for the weary,” he said.