This summer is proving once more to be tense for financial markets. Equity investors have by now probably lost most of this year’s gains. But all it takes is tweet to turn fortunes around, and giving that fundamentally the global economy is not in such a bad state, holding on is probably the best idea. The following continue to hold markets hostage;

German coalition fails to agree on immigration issues

Immigration issues are once more tearing Europe apart. This time a severe row has developed between Germany’s historic allies Merkel’s Christian Democrats (CDU) and Bavaria’s conservative Christian Social Union (CSU).

At a time when EU countries are deeply divided on how to handle the massive influx of immigrants from mainly Africana and Middle Eastern countries, the row in Germany threatens to break up the current governing coalition after only three months in power.

The CSU wan migrants rejected at the border if they have already registered in another European country. Merkel believes that this would be a major setback to the EU’s crown jewel achievement, the Schengen free border system.

If the CSU go ahead with their plans, Merkel would probably be forced to fire him. That could lead to a breakup of the 70-year old alliance between the CDU and the CSU, and a possibility of Merkel being side-lined. Definitely this would mark a massive shift in the EU’s political direction and stability.

Auto tariffs

President Donald Trump’s threat to impose 20% tariffs on imported cars and parts would be a negative for the global automobile industry. European car makers in particular could see their revenues seriously impacted. The US is the biggest and highest margin market for the German automakers. US clients tend to go for the luxury and sporty segment that BMW, Mercedes and Porsche tend to excel in. US supply segment is also largely either non-existent or uncompetitive.

According to Eurostat, the US imported the equivalent of 254 billion euros in 2016, most of the imports came from Germany. Analysts believe there is no policy that Europe could implement to offset such an impact. However, taken in isolation the overall impact of the tariffs on German GDP should not be greater than 0.2 percent, and less than 0.1 percent.

A sticking point for the EU, in eventual negotiations, would be the fact that under WTO rules the EU would have to remove any tariff for every country in the world if it removes the 10 percent tariff with the US. However, estimates by Merill Lynch showed that a 7.5 percent appreciation of the dollar would practically cancel any impact of the tariffs. Once more policy maker eventually have to bow to the mercy of the market.

US China Trade spat

An escalation on trade threats between the US and China is now a reality. Rhetoric between the two parties has only led to a very low downward spiral. A small slice of positive news. There have been suggestions that Donald Trump’s administration may back away for plans to impose limits on Chinese investment in American technology companies and high-tech export to China.

This may be a signal that Trump may be seeking a way to avoid a potentially catastrophic trade war with China. China has already signalled that it is ready to punch back. Given that China may not have the capacity to retaliate to further trade sanctions like-with-like, China may well resort to other unconventional retaliatory measures.

These may include limits on tourism, caps on purchases for US companies operating in China, currency devaluation and the nuclear option, dumping US treasuries. All these options will ultimately impact China and global economics negatively, thus China is intensifying diplomatic efforts to resolve the stand-off.

The pity is that everyone seems to want the same thing but getting there is no easy feat. Hope is that there is enough common sense. Hope is last to die.