On Sunday, Michelle Bullock of the Reserve Bank of Australia gave a speech in Shanghai as part of a conference on finance and technology. On Monday, Bank of Japan Governor Haruhiko Kuroda spoke at the Branch Managers’ Meeting. Wednesday’s podium went to President Mario Draghi of the European Central Bank in Frankfurt. Also on Wednesday, Bank of England Governor Mark Carney spoke in Boston, Massachusetts.
Yet the only person anyone was listening to was Donald Trump. He is holding all the cards. Everyone listens to what he has to say hoping to get clues regarding his next move on tariffs, which appears to have more weight than any individual reports.
The Trump Trade War seems to move markets higher one day, then lower the next.
And Trump is not shy about speaking his mind.
On Tuesday, from the White House lawn prior to his visit to Brussels, Trump criticized NATO. He said the organization “has not treated us fairly.” And that was only the tip of his message, delivered more fully at the NATO meeting. Although he came out of the meeting with a positive message, interim reports were not as promising.
On Wednesday, he attacked Germany’s energy connection to Russia, saying, “Germany is totally controlled by Russia.”
During his visit to England this week, President Trump told a British tabloid newspaper that Prime Minister Theresa May’s “soft” Brexit plan risks killing a future trade deal with the US. Trump also said that former foreign secretary Boris Johnson would “make a great prime minister.” Was he just speaking without thinking in his usual brash style, or was he hinting at something?
But then, at Friday’s joint press conference with Theresa May, Trump reaffirmed the potential for a future free trade deal once Brexit has been fully implemented. Referring to the Brexit deal, he said to May, “Whatever you’re ‘gonna do’ is okay with us. Just make sure we can trade together; that’s all that matters.”
Probably in reaction to all this uncertainty, most commodity prices fell this week, with a few exceptions.
It seemed like a week ago everyone and his brother-in-law wanted to buy crude at $75 a barrel. It closed on Friday at $71.
Copper, a fading bull market, dropped from $281.50 to $277 a pound.
Sugar, which ended the previous week at 11.50 cents a pound, closed on Friday under 11 cents. It is searching for support somewhere … anywhere.
Grains were lower on the week. On Thursday, the USDA released its July WASDE report. The USDA report was friendly for corn with a lower carryout reported.
On the other hand, there was a bigger carryout for soybeans due to lower export demand. More significantly, China’s retaliatory tariffs on soybeans have really taken a toll on US soybeans, which are trading at a $1.60 discount to Brazilian beans. The United States is the world’s leading producer and exporter of soybeans, corn, and wheat. At the end of May, soybeans were trading at 1050 a bushel; on Friday, soybean futures were at 820 a bushel, their lowest price in a decade. The other grains have also had dramatic losses.
In currency trading, the September dollar index futures contract moved up about .8%.
Bitcoin moved about 6% lower last week.
Moving counter to this trend, the Dow Jones Industrial Average closed up about 550 points on the week as the stock market shrugged off new trade war fears.
This week should prove no less exciting.
Monday brings a host of important Chinese reports, including retail sales and GDP. Also due out on Monday are the US retail sales figures. But the major market mover will possibly be the meeting between Trump and Putin, also scheduled for Monday, and their speeches following that meeting.
Tuesday is the day the Reserve Bank of Australia releases the minutes of its meeting, and US Fed Chairman Powell will be giving his testimony before the US Senate.
On Wednesday both the Eurozone and the UK are due to report on their respective Consumer Price Index figures. We are also anticipating further testimony from Powell.
On Thursday, Australia will release several important economic reports, including employment data.
On Friday, Canada’s economic reports will include retail sales figures and their Consumer Price Index.
Of course we will have the regular host of weekly reports, such as the EIA crude stocks report on Wednesday.
In spite of all this, Trade War news will likely be the catalyst for any market moves.
It is a generally held belief, “In a trade war, everybody loses and nobody wins.” Of course, as a speculator, you are in a position to take advantage of any market movement. Just make sure your account is well-funded to absorb the short-term fluctuations that may affect your equity.