China holds the key to the next move in markets
Following the US tariffs announcement here, China has vowed to retaliate in kind with their own countermeasures. Since then, the market has been in a relative pause with equities not seeing any further drop nor is it recovering any further than it did earlier as well (twilight zone trading is part of the reason too).
All this sets up the stage for European traders to add onto the risk-off sentiment that we're seeing now. But the big caveat is that when it comes to the trade rhetoric so far in the last few months, the trade has always been to fade it.
The additional $200 bn tariffs by the US would prompt a stark response by Chinese authorities and that could have larger potential ramifications than traders can factor in or brush aside. To put short, there's a huge chunk of uncertainty of what these trade measures/tariffs would do to the global economy. And investors/traders hate uncertainty.
For now, the doom and gloom headlines will continue to do the rounds and weigh on markets. That and the fact that markets are waiting with bated breath on China to announce details of their countermeasures won't offer a helping hand to risk assets on the day.
However, if there is no new developments to be seen then expect greed to slowly trump fear once again - like we saw last Friday up until trading yesterday. The saying is that "people never change". Well, the same applies for markets.