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Good morning. The trade war is raging, markets are reeling and Uber is getting close to white knuckling. Here’s what’s moving markets. 

“Hurt Very Badly”

The trade war is officially back under way. China retaliated to the increased U.S. tariffs on Monday and now the U.S. is preparing new levies on a further $300 billion of products. President Donald Trump warned China it will be “hurt very badly” should it follow through with its threat for tit-for-tat tariffs, but said he will meet with Chinese President Xi  Jinping. Markets reeled, although on relatively low volumes, and traders are left assessing which sectors and assets are most exposed. Add to the pot that Europe is preparing to hit back if the U.S. puts auto tariffs into force this month. Expect volatile days ahead.

Impact Everywhere

The stock selloff moderated in Asia on Tuesday, but the impact of the tariff battle reaches far and wide. Oil slipped on Monday but has made up some ground this morning. Cotton is getting killed. The weakness of China’s yuan against the euro is a headwind for exporters and JPMorgan thinks a previously bullish signal of investors ramping up stock exposure could now prove a negative. So, where to hide? The yen’s safe-haven attractions are gaining a few fans and some suggest looking at all those other Asian nations that are not China. Oh, and Bitcoin is still surging.

Cuts Expected

The market is now convinced a quarter-point rate cut is coming from the Federal Reserve this year, driven by concern that the tariffs will dent the economy. Fed Vice Chairman Richard Clarida says the lower rate environment is likely to continue for some time yet, adding further dovish rhetoric to the debate about global monetary policy. Goldman Sachs Group Inc., however, says the trade war will drive inflation higher and raise the chance of a rate hike next year a little.

White Knuckle

It's tough to imagine the year's biggest IPO going much worse. Uber Technologies Inc. shares plummeted on the second day of trading as investors fled from a speculative bet on the ride-sharing industry. Uber is closing in on “white knuckle” territory and its boss is warning these tough times could be around for a while yet. The year’s other unicorn listings joined Uber on the way down, including its ride-sharing rival Lyft Inc. and photo-sharing social network Pinterest Inc. which dropped after a series of cautious views from analysts.

Coming up...

The monthly oil market report from OPEC is due later, following a day when crude oil managed to avoid most of the trade-related market tensions. Euro area industrial production and the ZEW economic sentiment survey in Germany will provide yet further peeks into how Europe is holding up. We also have results from two big European companies, with German insurer Allianz SE posting better-than-expected profit and U.K. telecoms giant Vodafone Group Plc reporting later. Note also today the addition of further Chinese, Saudi Arabian and Argentinean shares to the MSCI emerging market stock benchmarks.

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