G10: China Unlikely To Sell US Treasuries But Things Will Have To Get Worse Before Getting Better

Danske Research discusses the latest market conditions amid the recent heightened US-China trade tensions.

"China today retaliated against Trump’s tariffs. On the surface it looks like a measured response but China is also likely to stop purchases of US agricultural goods and other products.

However, we believe China will retaliate in a moderate way in order not to provoke a further escalation. We do not expect China to sell US treasuries," Danske notes.

"We continue to see the risk that things will have to get worse before they get better and that it will take financial stress and declines in the stock markets to get Trump back to the negotiation path," Danske adds.