Weekly roundup: Market uncertainty and confusion
Market uncertainty and confusion over global trade developments were the dominant market themes this week.
Donald Trump’s threat at the start of the trading week to ban Chinese companies from investing in US technology firms simply sparked risk aversion and roiled financial markets. However, Trump softened his stance on Wednesday which came as a breath of fresh air for markets. White House economic advisor Larry Kudlow was quick to squash the optimism though, when he stated that the US administration’s latest approach towards China shouldn’t be characterised as a retreat.
Although there was an EU economic summit and key economic data releases from the United States this week, markets were clearly more concerned with the global trade developments.
Speaking of the United States, first quarter economic growth disappointed by printing at 2.0%, which was below the 2.2% market expectations. Although the Dollar depreciated following the release, the overall outlook remains firmly bullish. With expectations of higher US interest rates elevated, investors may exploit the Dollar correction as an opportunity to elevate prices higher.
In the commodities arena, this has been another miserable trading week for Gold despite global trade tensions weighing on sentiment. It is becoming increasingly clear that a broadly stronger Dollar and rate hike expectations are likely to continue heavily impacting the zeroyielding metal. Oil was bullish this week and has scope to extend gains as geopolitical risk factors spark concerns of supply disruptions.
While trade tensions are likely to remain in focus over the coming week, much attention will be directed towards the US jobs report. This will be a very significant release which could impact global stocks, commodities and emerging markets. A strong NFP coupled with signs of accelerating wage growth may heighten expectations over the Fed raising interest rates faster than expected this year. Alternatively, a disappointing jobs report could weaken the Dollar and weigh on US rate hike expectations – ultimately supporting emerging market currencies, stock markets and Gold.
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