Shares slide as Trump raises specter of longer, wider trade war

© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt

By Julien Ponthus

LONDON (Reuters) – European stocks opened higher on Wednesday, recovering some of the losses made in the previous session when U.S. President Donald Trump surprised world markets by saying a trade deal with China could wait until after the 2020 presidential election.

U.S. stocks sold off for a third consecutive session overnight, while Asian shares extended losses as hopes for a quick preliminary agreement between the world’s two biggest economies were dashed.

A full-blown global trade war is currently seen as the biggest threat to world markets. Fresh U.S. tariffs on Argentina and Brazil, plus a threaten to impose duties on French goods, are fuelling fears that risks are tilting towards an escalation of the crisis.

“Any doubts about the vulnerability of equity markets to the mood of the U.S. President should have been dispelled, as his recent tweets and comments have nearly wiped out the entirety of November’s gains,” said Ian Williams (NYSE:), economics & strategy analyst at Peel Hunt.

The pan-European equity index STOXX 600 (), which had slumped 2.2% since the beginning of the month, rose 0.4% but futures markets were still pointing to a slightly negative open on Wall Street.

The mood on European trading floor is subject to change, with investors awaiting a salvo of surveys on the health of the service sector of major European countries.

“For some months now there has been a concern that the weakness in the manufacturing sector might start to weigh on services activity and there has been some evidence of that in recent months, though not quite to the same extent,” wrote Michael Hewson, chief market analyst at CMC Markets, to clients.

The latest trade war scare has

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