Up, down, up down.
The markets have been trading wildly over the last few days, as panic is setting in across both the United States and Chinese stock markets.
The trade wars that truly never ended, but only temporary receded, are not only back on, but accelerating once again.
The United States government has stated that the Chinese government has not held true on their last round of negotiations and have failed to keep their promises.
This prompted the United States Secretary of the Treasury, Steven Mnuchin to lash out and state that further tariffs would be placed on Chinese goods entering into the United States, beginning Friday.
Robert Lighthizer, the current United States Trade Representative had the following to say;
“We felt we were on track to get somewhere. Over the course of last week we have seen an erosion of commitments by China,” Lighthizer said, adding that significant issues remain unresolved, including whether tariffs will remain in place.
Markets, which briefly recovered, crashed hard on this news, with the Dow dropping 450 points and falling below its 50 day moving average, while the VIX has spiked back above 20, indicating that investors are nervous.
However, it was not just the US markets that suffered under this recent news, not at all.
Chinese equities and the yuan also tumbled lower on this latest round of trade wars, causing their markets to suffer its largest one day drop in three years, followed by another vicious move lower the next day.
This has prompted Chinese officials to reach out in a conciliatory tone, hoping to calm down the markets and those within the US administration who are less than pleased that they have not held up "their end of the bargain".
People's Daily China released the following statement;
"Mutual respect, equality, and mutual benefit are the premise and basis for reaching an agreement, China's Foreign Ministry said on Tuesday at a regular press conference, adding that tariffs will not solve any problem."
Unfortunately for the Chinese economy, this news couldn't of come at a worse time as the European Central Bank just lowered its growth forecast for the European Union, citing continued uncertainty surrounding BREXIT as the cause.
This places Chinese officials between a rock and a hard place, as the Chinese economy is much more dependent on the success of the Euro zone and US economies, than the latter are on theirs.
This isn't your typical jawboning of the past, as the current US administration has shown more than once that they are willing to throw caution to the wind and negotiate hard, even if it risks damaging their own economy.
This has caused investors to flee to the safety of Treasuries once again, while foolishly ignoring the safety that only precious metals can offer in a time such as this.
Whether or not the rhetoric will continue to accelerate from this point on is anyone's guess, but with the VIX exploding higher, it appears that the markets don't believe that this round of pain is going to be settled anytime soon.
Expect increased volatility and hostilities at least in the short term, as the trade wars continue to escalate and heat up. Buckle up, this ride is going to get a whole lot bumpier, before it settles down again.
- Source, Sprott Money Blog
This places Chinese officials between a rock and a hard place, as the Chinese economy is much more dependent on the success of the Euro zone and US economies, than the latter are on theirs.
This isn't your typical jawboning of the past, as the current US administration has shown more than once that they are willing to throw caution to the wind and negotiate hard, even if it risks damaging their own economy.
This has caused investors to flee to the safety of Treasuries once again, while foolishly ignoring the safety that only precious metals can offer in a time such as this.
Whether or not the rhetoric will continue to accelerate from this point on is anyone's guess, but with the VIX exploding higher, it appears that the markets don't believe that this round of pain is going to be settled anytime soon.
Expect increased volatility and hostilities at least in the short term, as the trade wars continue to escalate and heat up. Buckle up, this ride is going to get a whole lot bumpier, before it settles down again.
- Source, Sprott Money Blog
