European stock markets showed modest gains today as cryptocurrencies experienced a rebound, fueled by indications that the escalating trade conflict between the U.S. and China might not be as severe as initially feared. The backdrop for this optimism arose from heightened tensions that flared over the weekend. Former President Donald Trump threatened to impose additional tariffs of up to 100% on Chinese exports starting in the upcoming month, citing “very hostile” actions from Beijing aimed at restricting the export of rare-earth minerals crucial for American industries. In response, China promised retaliation unless Trump retracts his stance.
Despite the escalating verbal confrontations, Trump and senior officials opened a door for potential negotiations with China, softening the approach. On social media platform Truth Social, Trump reassured investors, stating, “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!” His comments provided some reassurance for European investors, leading to a generally positive opening for stocks.
The UK’s FTSE 100 index climbed 0.2% in early trading, while other major European markets, including those in France, Spain, and Germany, reported increases of around 0.5%. In the realm of cryptocurrencies, major currencies saw a recovery after a significant decline over the weekend. Bitcoin rose 0.3%, surpassing the $115,000 mark after briefly dipping below $105,000, while Ether bounced back to approximately $4,100 from a low of less than $3,500.
Market analyst Richard Hunter from Interactive Investor noted that traders are optimistic about a phenomenon dubbed the “Taco trade,” which suggests that market rallies often occur as Trump tends to retract from his more aggressive tariff threats. Hunter explained that the president’s unpredictable nature creates a tense investment climate, but some are already speculating that a market upswing may be on the horizon.
However, this renewed confidence in stock markets has not fully dispelled investor fears. Many are turning to gold, a traditional safe haven asset, pushing its spot price to a new high of $4,078.5 an ounce on Monday.
Derren Nathan from Hargreaves Lansdown mentioned that U.S. stock futures indicate a potential for a partial rebound when trading opens later in the day. Traders are hoping for a repeat of a past scenario, where American indexes experienced continuous growth over several months, spurred by a series of trade deals and growing optimism about a soft landing for the U.S. economy.
In the pharmaceutical sector, shares of Anglo-Swedish firm AstraZeneca initially increased after securing a deal with Trump aimed at lowering drug prices and avoiding tariffs. However, these shares retreated by 0.4% shortly thereafter.
Despite these positive flickers in the European markets, anxieties remain prevalent in Asia, where stock markets suffered significant losses. The Hang Seng index in Hong Kong plummeted by 2.3%, while markets in Taiwan and Thailand fell by 1.4% and 2%, respectively. In mainland China, both the Shenzhen and Shanghai exchanges recorded declines of 1.4% and 0.4%.
Amid the escalated trade tensions, a Chinese foreign ministry spokesperson urged the U.S. to rectify what it termed “wrong practices,” while affirming that China would take action to protect its interests.
In a contrasting economic note, China reported a notable bounce back in its exports for September, surpassing forecasts with an 8.3% year-on-year increase, reaching the fastest growth rate since March. This exceeded the anticipated 6% rise predicted by economists and followed a more modest growth of 4.4% in August. The surge in exports suggests that China is successfully diversifying its markets despite the ongoing trade issues.
