Risk stays on the defensive in European morning trade

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Equities are keeping lower on the day while bonds are firmer as market participants are feeling anxious amid US-China tensions. All eyes are on US House speaker, Nancy Pelosi’s visit to Taiwan with the jet believed to be carrying her delegation is seemingly en route to Taipei now.

China warned of potential military actions in response but I reckon markets will breathe a small sigh of relief just to know that Pelosi did arrive safely. I mean there are murmurs of flight safety concerns and while it isn’t something nice to say out loud, it is surely in the back of people’s minds just in case.

That said, expect China to retaliate in some other form or way to this event. The magnitude of said response is going to set the tone for markets in the sessions ahead. I want to say that the trade would be to buy value, sell hysteria i.e. fade the fear but we will see.

European indices are mostly down 0.4% to 0.7% currently with S&P 500 futures down 27 points, or 0.7%, on the day. Elsewhere, Treasury yields are still looking heavy with 10-year yields continuing its recent technical break lower:

This article was written by Justin Low at www.forexlive.com.

Go to Forexlive

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