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Fed and trade war: double strike

Fed and trade war: double strike

Erik Holm - Head of media

Judging by the dynamics of the futures, on Wednesday the US stock market will open up with a sharp growth the day after the largest daily decline for the year due to the escalation of the trade conflict between the US and China. At 1 p.m. London time, the DOW blue-chip index futures rose by 250 points or 1%, futures on the S&P 500 rose by 27 points or 1%, and futures on the high-tech Nasdaq 100 traded higher by 87 points or 1.2%.

Wall Street recorded the worst trading session in 2019 on Monday. The S&P 500 index fell by 3% amid a tougher trade was between the US and China. The S&P 500 index declined for six consecutive trading sessions until Tuesday and is 6% below its record level recorded on July 26.

Sales on stock markets began last week when Fed Chairman Jerome Powell made statements in favor of a tighter monetary policy compared to forecasts of market players. These statements were made at a press conference on July 31 after the end of the Fed meeting. On Monday, the negative reaction of the markets became more apparent when the Chinese authorities allowed the yuan to drop below the psychologically important level of 7 yuan per dollar when the yuan fell to its lowest level since the global financial crisis of 2008. Some investors see the change in the Chinese currency rate as an immediate response to Trump's latest threat to impose new duties on Chinese goods

This led Washington to call China the currency manipulator for the first time since 1994, which sharply increased tensions in the ongoing trade conflict between the two largest economies in the world.