By: Anas-ur-Rasheed Khan
After last week’s market fiasco, which sent the S&P500 and the DOW plunging around 1%, stocks showed a somewhat muted resilience in the face of the recent tariff imposition proposed by the Trump administration. Throughout the week, news from the white house sent mixed signals, moving markets up and down. A major concern, particularly for Australian markets, the proposed tariffs could trigger a trade war. JP Morgan’s co-president warned just yesterday that stocks could fall as much as 40% if a trade war was entered into; fears subsided going into the end of the week when news emerged that some countries would be ‘exempted’. This positive news translated into optimism on the last trading session of the day, sending stocks higher. The ASX ended the week up ~0.57%, extending its recovery after the debacle witnessed earlier this month.
In commodities oil was pushed to a 3 week low after data emerged indicating accelerated weekly output from the U.S. Crude oil futures ended the week down more than 2%, indicating lower prices heading into the following week. Gold prices settled at almost a 2 week high following heightened volatility in the markets over the past month and a declining US dollar over the week.
Forex markets were also dominated by tariff news coming from the white house. The DXY US Dollar Index recovered well going into the ending of the week, erasing all losses incurred earlier losses pertaining to the announcement of tariffs and ending 0.22% up on the week. Currencies such as the Peso and the Canadian dollar showed strength after Trump formally announced that Mexico and Canada would be exempt from tariffs for now- subject to negotiations of course. The Peso ended the week up ~1.15% against the USD, while the CAD recovered losses to end a ~0.31% down against the USD.
Treasuries showed mixed signals this week, fluctuating in response to news coming out of the white house. Earlier in the week when trade war rhetoric was being thrown around, treasury yields in the US showed strength and were up almost 6 basis points. However, treasury yields fell on Thursday and Friday following optimism in the stock markets as fears of a trade war subsided. Furthermore, hawkish remarks by ECB President Mario Draghi sent bond yields in Europe falling after an indication that the ECB would not shy away from asset purchases if it saw weakness in the economy. Australian 10 and 2 year government bond yields stood at 2.78% and 2% respectively at the end of this week.
More crypto fiasco was on the screens this week with Bitcoin and most of its peers plunging around 20%. Although some are suggesting that the plunge was due to ‘technical factors’, others are blaming an SEC statement during the, which warned investors about investing in non-regulated exchanges and called for tighter trading restrictions across all trading avenues.