A look at the day ahead in European and global markets from Rae Wee

It’s been a turbulent week for investors marked by a tech selloff on the back of deepening Sino-U.S. trade tensions, uncertainty over U.S. President Joe Biden’s fate in the presidential race, and China’s lacklustre third plenum outcome.

And as the global outlook becomes increasingly precarious, even interest rate expectations have somewhat taken a backseat for now.

On hindsight, the attempted assassination of Republican presidential candidate Donald Trump last weekend may have been a foreshadowing of more turmoil to come for markets, which has since been reflected in a spike in the VIX index – Wall Street’s fear gauge.

Asian shares struggled to find a floor on Friday, as the selloff in technology stocks spilled across sectors, with Europe also set for a lower opening.

Even a stellar set of earnings and forecasts from Taiwan’s TSMC wasn’t able to tame investors’ fears of a further U.S. chip crackdown on China, as shares of the world’s largest contract chipmaker extended their declines on Friday.

Coupled with comments from Trump this week that Taiwan should pay the U.S. for its defence, TSMC was headed for its worst weekly decline since late May, with more than T$2 trillion ($61.06 billion) wiped off its peak market value.

The cautious market mood gave the dollar some safe haven support on Friday, as it distanced itself from a four-month low hit on the back of rising bets for an imminent Federal Reserve easing cycle.

Fed policymakers have in recent days set the stage for a September rate cut, while the European Central Bank left the door open on Thursday for a similar move.

As for the Bank of England, conditions are still not ripe for an easing of rates, and traders have reduced the chances of an August cut.

UK retail sales figures are due later on Friday, where expectations are for the wet and cold weather in June to have kept shoppers away.

In China, officials acknowledged on Friday the sweeping list of economic goals re-emphasised at the end of a key Communist Party meeting this week contained “many complex contradictions”, pointing to a bumpy road ahead for policy implementation.

Key developments that could influence markets on Friday:

– Germany producer prices (June)

– UK retail sales (June)

– Fed’s Williams, Bostic speak

– American Express Q2 earnings

($1 = 32.7560 Taiwan dollars)

(Editing by Muralikumar Anantharaman)

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