Shane Oliver, AMP
After a third round of talks made little progress last week, the US/China trade war has escalated badly with tit for tat moves on an almost daily basis by each side. This has seen share markets fall sharply with US, global and Australian shares down about 5-6% from recent highs and safe haven assets like bonds and gold benefiting on the back of worries about the global growth outlook. This note looks at the key issues.
The key points are as follows:
The trade war between the US and China is escalating, posing a rising threat to global growth
Although we remain of the view that a deal will be reached, the risk has increased
Share markets may need to fall further in the short term to remind both sides of the need for a deal and get them talking again
However, we regard the fall in share markets as another correction rather than the start of a major bear market