European markets will assess the effect of the trade controversies aggravation between the United States and ChinaThe European market participants will continue to assess the effect on the world economy and Europe itself of the new reciprocal customs duties of the United States and China.
New American duties on Chinese imports worth more than $200 billion shall come into force since January 24. Currently, these duties amount to 10%, and since January 1 they will be 25%. In response to American measures China will also impose import duties since September 24 on 5.2 thousand American items worth $60 billion.
Market participants expect that escalation of trade conflict between the United States and China could lead to a slump in the world oil prices due to decrease in Chinese demand for oil. However, expectations regarding reduction of oil supplies from Iran, which suffers from American economic sanctions, may somehow level such slump.
Besides, a question on possible introduction of 25% duties on imports of European cars from the United States remains open. As the conflict between the United States and China increases, the prospects for introduction of these trade measures against European cars are becoming more and more daunting.
However, indicators of the eurozone economy also give rise to concerns. Thus, according to IFO Economic Research Institute forecast, the region’s GDP growth in 2018 may reach 2%. Forecast for economic growth in the eurozone was aggravated because previously GDP growth had been expected at the rate of 2.3% as of the current year-end.
The current year-end inflation forecast amounts to 1.2%. According to the results of Q3 and Q4, the figure is expected to reach 1.2%, and in Q1 2019 - 1.3%.
The situation with Brexit will go on. Despite some progress in discussing the conditions of the United Kingdom exit from the European Union, many issues still remain unresolved.
Ivan Marchena, analyst,
Libertex