US / China negotiations chill investors

After putting a new halt to their negotiations at the beginning of August and threatening each other with new tariffs, Washington and Beijing agreed to resume talks at the G20 in Biarritz. It must be said that the tensions between the two countries are reflected in their own economies. "No one can predict the outcome of these negotiations, but there have been positive signs from both sides in recent weeks", say strategists SG CIB. It is unlikely that there will be an agreement this week. The Chinese authorities even want to reduce the number of negotiating topics, which adds uncertainty. In addition to trade issues, Washington wants to address other topics such as intellectual property. "We expect more a status quo than a mini-deal", fears John Normand, cross-asset strategist at JPMorgan. "This may be good news as it increases the likelihood of an agreement, albeit limited and at a minimum", nuance for its part, Stéphane Déo, strategist at LBPAM.

But this may not be enough for investors worried about the growing risk of a recession after last week's indicators showing a contagion of the slowdown in the manufacturing and services sectors. And the latest figures released yesterday in Germany are not reassuring. Orders for the industry fell 0.6% in August from July, raising fears of a bad third quarter and reinforcing the specter of the recession.

The stock market is in a fragile position with few buyers. It has increased by 15% since January in Europe despite earnings growth prospects which continue to be revised downwards to -2.2% for the third quarter. In addition to the trade war, the Brexit weighs on the accounts of companies. Worse the forecast for 2020 at over 10%, too high, raises the risk of a correction. Except in the case of an agreement between Beijing and Washington, which has hitherto supported the market with the return of central banks to a more accommodating tone.