As commercial tensions between US and China continue to strengthen due to additional USD 200 billion tariffs (total stated: USD 450 billion), worries from investors in Asian equities have led the Asian market into turmoil.
Indeed, the Shanghai Composite Index fell by -3.78%, the Hong Kong Hang Seng by -2.78% and the Nikkei 225 by -1.77% while EU Euro Stoxx 50 and US S&P500 indexes decreased to a lesser extent by -0.90% and -0.40% respectively.
In a more reassuring tone in order to relieve investor’s fears, the People’s Bank of China (PBOC) Governor, Yi Gang, confirmed in a statement that investor’s sentiment remains largely sentiment-oriented and should remain “calm and rational”. The central banker confirmed that the PBOC monitors market movements and that the room for maneuver remains largely under control, adding also that it is planning to use monetary policy tools, in order to ensure stable liquidity and, to a larger extent, durable economic growth.
As the situation is calming down, we expect current downfall to stop and a recovery phase to start. The USD/CNY upward trend amid market selloff and trade war tensions temporarily stops. The pair is currently trading at 6.4746, heading along the 6.4570 range in the short-term.
By Vincent Mivelaz