Global stock markets were on track to suffer their worst month of the year in May, as a steady drip of negative headlines over the relationship between the US and China amplified growth concerns and sent investors out of equities and piling into the government bond market.
Oil prices have also collapsed touching a low of $64 for Brent.
Investors are now weighing how the tensions over trade and technology between the world’s two largest economies will develop at the G20 summit in June, as political disruption coincides with worries over whether the economic cycle has peaked.
“Populism and its close cousin protectionism are rearing their heads, and have already taken a toll on global growth,” said Diane Swonk, chief economist at Grant Thornton.
Brent crude lost more than 10 per cent in May to fall back below $65 a barrel, as fears over the worsening US-China trade war rattled investors and put oil on course for its worst month this year.
But traders are warning that the spot price is not telling the full story. Instead, some are pointing at the way oil prices are moving for contracts on different delivery dates to tell a more nuanced tale. Brent contracts for the next few months are trading at large premiums versus those for delivery later this year — a classic sign of tightness in the market.
This could trigger a rebound in oil, should tensions between the US and China begin to ease.
