With the US-China trade war already creating an uncomfortable trading atmosphere, the brewing political tensions between long-time allies the CDU and CSU in Germany has caused some bloody losses in the eurozone.
The DAX plunged 190 points as Monday went on, sending it back under 12850 to effectively complete the erasure of the unlikely gains it saw after the ECB announced the end of its QE programme, but crucially was dovish on interest rates, last Thursday. This sharp drop came as Angela Merkel clashed with chairman of the CSU, Horst Seehofer, over the Chancellor’s stance on migration, namely the issue of refugees arriving in Germany who have already been registered as asylum seekers in other European countries.
Some analysts have called this Merkel’s ‘worst crisis’ in more than a decade, a claim that is contributing the red-soaked eurozone boards. The CAC dropped 1.3%, with the FTSE MIB and IBEX 35 slightly less concerned, but still unhappy, with their respective 0.6% and 0.5% declines.
As for the FTSE, despite Brent Crude climbing back above $74 per barrel after rising 1%, the UK index couldn’t shake the wider trade war concerns. Instead it fell half a percent, leaving it barely above 7600 and at its worst intraday price since the end of May.
The pound fared no better, slipping 0.2% against both the dollar and the euro following a bearish report from the British Chambers of Commerce.
And it doesn’t look like the US open is going to make things any easier. The Dow Jones is set to drop 160 points when the bell rings on Wall Street, a slump that would take the index back to 24900 and near a 2 week nadir.
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