Trade War at the Center of the G7 Summit

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World stocks dropped on Friday. This happened because of the expected trade tensions and their dominance on this weekend’s meeting of G7 countries.

Risk-Off

Analysts expect the U.S. to have more rate hikes. The European Central Bank is expected to wind-down their huge financial stimulus. Investors says all of this contributes to the risk-off tone.

It’s expected that the U.S. Federal Reserve is going to raise their interest rates in the next week. If this happens, this will be the second hike this year. Experts expected that there would be three rate increases this year, but this is hinting at four now.

Policymakers in the ECB are having a meeting on June 14. According to the bank’s chief economist, they will discuss if they have to end bond purchases in this year. This message made the euro a hit in emerging markets and sent it to a three-week top.

G7 Summit

However, markets will have to wait for the results from the G7 summit in Quebec before those meetings. The expected risk of a tax war between the U.S. and its most important trade partners will be the most important thing to look out for.