Weekly roundup: Mar­ket un­cer­tainty and con­fu­sion

Financial Mirror (Cyprus) - - WORLD - By Luk­man Otu­nunga, Re­search An­a­lyst at FXTM

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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