European stocks end lower, euro nudges down on Draghi speech 

Summary:

• European stock markets end the day lower but off the lows
• Trump reignites trade war concerns 
• Euro trades slightly lower on the back of Draghi’s remarks 

Tuesday ended with substantial losses across European stock markets following reignited concerns with regard to a trade war between the US and China. German DE30 as well as French CAC40 fell the most (over 1% each), but overall stocks recovered to some extent closing off their daily lows. 

It looks like an end of trade tensions between the US and China has just become more distant after the latest statement released by the White House. President Donald Trump has ordered to identify up to $200 billion Chinese goods for which new levies might be put should China "refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced". A new tariff rate would be 10%, and it appears it can be introduced if the second largest economy in the world keeps working on further $16 billion tariffs being set aside thus far (notice that China has so far decided to slap the US with $34 billion levies coming into effect on 6 July). 

While equity investors are counting their losses resulting from the ongoing turmoil on the stock markets the same cannot be said about cryptocurrency traders. The capitalization of the whole market jumped significantly from $275 billion to almost $290 on the reports that one of the payment companies was granted a license to trade digital assets. Despite some negative remarks from South Korean central bank majority of the most popular coins is trading higher today.

Mario Draghi, head of the European Central Bank, reinforced his dovish message we have heard during the latest post-meeting press conference. Let us recall that the ECB governing council decided to continue the QE programme in its current form until the end of third quarter and later to phase it out during the final quarter of the year. Moreover, European monetary authorities informed markets that any rate hike will not be coming sooner than in the second half of 2019.

China-US trade tensions are taking their toll, albeit not every market is doomed to failure. There are also some which could benefit from levies imposing by the two world’s largest economies. In today’s analysis we focus on 5 markets being the most affected by Trade Wars.

Paradoxically, further escalation of the China - US trade dispute helps the US dollar recover as investors park their cash in the US Treasuries. As a result, the yield on US10Y debt is falling 4bps on the day while the greenback is the second best currency on Tuesday being just behind the Japanese yen, a natural safe haven asset.