Investors Watching On Nervously

European futures are looking a little flat ahead of the open on Wednesday as investors watch on nervously for any further escalation in the trade war between the US and China.We've gone from being hopeful a couple of weeks ago that talks in Shanghai would aid progress towards a deal and the removal of tariffs, to new tariffs, China no longer buying US agricultural goods and the US labeling China, a currency manipulator. That's some escalation in a little over a week.While some may suggest that the weakening of the yuan to above 7 against the US dollar is a natural response to the tariffs and impact they'll have on the Chinese economy, it did feel like a stinging reminder from one regime to another that other weapons in the artillery besides tariffs.While the argument always made is that it's in both sides interest for this situation to be resolved, it does feel like this has moved beyond rational thought and become a matter of pride. A stand-off between the two biggest kids in school, neither of which really want a fight but would engage in one to avoid looking weak.Gold buoyed by recent eventsGold is doing very well out of all of this, climbing on the back of a softer dollar, risk aversion, and just a broader beneficial environment, from a monetary policy perspective. It's stumbled just shy of $1,500 today, but momentum isn't exactly against it, and I do not see much of a shift in the environment at the moment.James Bullard's comments on Tuesday were interesting, in which he suggested that another rate cut in September is far from guaranteed and that we'll have to see how the data rolls in before making a judgment. Coming from the most dovish voter on the voting committee, this is a big statement and suggests markets are once again too confident. Expectations have been slightly pared-back, but they may have to come a little further.Oil drop an unintended victory for Trump.Oil is far from enjoying the recent developments in the trade spat, given the importance of the two countries involved from a demand perspective and the knock-on effects to others. Prices have tumbled around 10% since last week and are now not far from the June lows. Trump may not have too much to brag about when looking at the markets in recent days, but perhaps this is one unintended benefit, as we all know, he loves lower oil prices.