Trading Nation

This international market is primed to benefit if a US-China trade war erupts

Trading Nation: Global stocks in a correction

The threat of a trade war between the U.S. and China grew more pronounced last week and there could be a winner from the fallout if tensions escalate, says one strategist.

"One of the bigger beneficiaries of that would be Germany — Germany and Europe broadly," Gina Sanchez, CEO of Chantico Global, told CNBC's "Trading Nation" on Friday. "European trade with China has been on the rise for the past 10 years."

China is the European Union's second-largest export market, according to the European Commission. Exports to China rose at an annual average rate of around 4 percent from 2012 to 2016, while the value of total trade between the EU and China rose 98 percent.

Germany's DAX was swept up in a global market sell-off last week as the possibility of a trade war between the world's largest and second-largest economies grew. President Donald Trump made concrete plans on Thursday to slam around $60 billion worth of China-made goods with tariffs. China responded by announcing tariffs on roughly $3 billion worth of U.S. imports.

The DAX closed Friday with a weekly loss of 4 percent, cementing its position in correction territory, having dropped 12 percent from a 52-week high set on Jan. 23. France's CAC 40 and the FTSE 100 in London ended the week down more than 3 percent.

Other global markets in a correction include the STOXX Europe 600, the FTSE 100, and the Spain IBEX 35. Japan's Nikkei is one of the hardest hit after dropping more than 14 percent from its January highs.

"The Nikkei is suffering from the fact that everyone is rushing into the yen as a safe haven currency, and so it will make that challenging," said Sanchez.

Bill Baruch, president of Blue Line Futures, sees a rebound in the DAX and Nikkei in their short-term technicals.

"There's a lot of support just below the market," Baruch told "Trading Nation" on Friday.

Baruch sees a level of support around the 11,600 to 11,650 mark on the DAX, and 20,400 level on the Nikkei. The DAX and the Nikkei are roughly 2 percent above those levels. He also says recent sell-offs in the two put their relative strength index closer to oversold territory.

"Look at it as a win-win situation — you either buy momentum after Friday or you're buying lower [this] week," he said. "The market is going to recover off some of these big support levels."

European markets lost earlier gains heading into the close in Monday's session. Germany's DAX was down 0.5 percent. The Nikkei saw one of the better bounces on global markets, closing the session with gains of 0.72 percent, after hitting a six-month low earlier in the day.