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Drum beat of war boosts oil, poses risk to markets

Another late sell-off was avoided on Wall Street, evidence that investors have grown more confident a trade war can be averted. Two men in the limelight, China’s Xi and Facebook’s Zuckerberg kept their cool and it was contagious for markets.

Shares in Asia were mixed as the optimism about a resolution on trade was offset by weaker than expected consumer price inflation data out of China. The downturn in Chinese consumer prices matches weakness in producer prices. China has been exporting inflation for around two years. If that has goes into reverse, it will make the exit from stimulus programs at other central banks more difficult.

The drum-beat of war has seen oil prices skyrocket over the last two days and is contributing to a lower open in European shares. Brent crude has crossed back across $70 per barrel for the first time in 3 weeks. Particularly if global growth stays on track without a trade war, tensions in the Middle East will be supportive of oil. But Syria has distinct risks. Military intervention in Syria that puts the US in direct confrontation with Russia can only be a bad thing for market sentiment.

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