Investor sentiment reversed after a number of negative headlines hit the wires on Tuesday. U.S. Secretary of State Mike Pompeo said Huawei is not the only Chinese company that poses risk to the U.S. raising concerns that the trade conflict may not be over between the world’s two largest economies.
Across the Atlantic, the Donald Tusk made it clear the EU would not remove the Irish backstop from the UK divorce plans, claiming the UK failed to provide a realistic alternative option to avoid a hard customs border. In his response to the UK PM’s letter to the EU, Mr Tusk kept the negotiating door open asking Mr Johnson to come up with a solution acceptable to both sides. German Chancellor Angela Merkel on the other hand said the backstop presents an issue in the future and not necessarily the exit agreement itself.
The current Italian Premier, Giuseppe Conte announced his plans to resign, sending Italian bonds higher as investors run for safe haven assets. Management of the country’s huge public debt remains a key concern in the short-term for the EU.
In Asia, a McKinsey report suggests companies in Asia are struggling to service debt obligations and this could potentially evolve into a new economic crisis. The situation is exacerbated by the slowing global economy and the U.S./China trade war that are causing profits to fall.