Market Summary
Asia
Asian markets saw mostly red for the week as U.S. trade policies weighed heavily on sentiment, especially in China. Mainland China’s Shanghai Composite slid lower by 4.4% for the week, with the index nearly heading into technical bear market territory. Hong Kong’s Hang Seng followed the lead of the mainland and slid 3.2% lower for the week. In Japan, the Nikkei was hit by a stronger Yen and fell 1.5% for the week as safe haven demand boosted the Yen late in the week. South Korea’s Kospi dropped 1.9% as well as investors fear a trade war will hurt the country’s technology industry. Australia was the lone winner in the region, with the S&P/ASX 200 gaining 2.2% as investors hope Australian products would be in higher demand in the wake of U.S and Chinese trade tensions.
So far the coming week looks to be shaping up as more of the same. There are no indications that the U.S. will be backing down on its new trade tariffs; and, in fact, it is looking to add to them aggressively. China can be expected to respond with their own tariffs; and as long as this issue remains in the spotlight, equities are almost certain to fall on fears of a global recession coming from the increasing protectionism.
Europe
European markets struggled nearly all week as the U.S. trade policies caused fears of a global trade war. Markets did put in a strong finish on Friday; but for the most part it wasn’t enough to erase losses from early in the week, and European markets finished with broad based weekly losses. The pan-European Stoxx Europe 600 fell 1.1% on a weekly basis, but Germany’s DAX led losses as it fell 3.3% for the week. Germany has the most to lose if protectionist trade policies take on a greater prominence globally. In France, the CAC 40 was 2.1% lower for the week after suffering a string of five losing sessions. London’s FTSE bucked the losing trend as it gained 0.7% for the week after flipping from negative territory with its Friday results.
While markets rebounded on Friday, much of that was due to the strong rally in crude that lifted energy shares broadly across the region. While the strength in crude could persist as the new week begins, it isn’t likely to have nearly the impact it did Friday. It’s also likely that trade war fears will return in force on Monday, which could lead to another week of losses across the region. Additionally, markets won’t get much in the way of economic data until Thursday, so there isn’t likely to be any relief from that direction.
US
U.S. markets had a rough week as investors were worried about the trade policies of the White House and the potential for those policies to cut into the growth being made by U.S. and global economies. By the end of the week all three of the major indices were lower on a weekly basis, with the Dow Industrials falling 2%, the S&P 500 losing 0.9%, and the Nasdaq edging down by 0.3% and snapping a four week long winning streak. The Dow snapped a streak of its own and avoided the longest losing streak in 40 years as it gained for the first time in nine sessions.
The upcoming week could see more pressure on U.S. markets as President Trump continues adding to the import tariffs, threatening on Friday to impose a 20% import tariff on European made automobiles. This trade policy issue is a huge headwind for equities, especially since investors have little to improve sentiment until the next earnings season, which won’t kick off for another month.
Gold/Crude Oil
Gold struggled for another week, seeing no haven demand from the fear being caused by the trade policies of the U.S. The yellow metal fell for three sessions in the middle of the week, and the rising sessions saw gains of less than 0.1%. That led to a loss of 0.6% for the week, which was minor, but all the more concerning due to the lack of haven demand for gold in the midst of a risk that was causing losses from equities. The coming week has little difference from the week just past. Unless President Trump miraculously calls off his new tariffs, that risk is likely to remain, and this could finally give gold a boost on haven demand. Otherwise the U.S. dollar is likely to continue firming, spelling more downside for gold.
Crude remained volatile through the past week as traders awaited a decision from OPEC policy makers regarding an increase to daily production levels. The final day of the week saw a huge rally after OPEC announced they would be raising production, but by less than was expected by traders. The rally took crude to its highest level in a month, and led to a gain of 6.1% for the week. The coming week is likely to be a strong one for crude as traders continue to celebrate the smaller than expected increase in crude production. A move back above $70 a barrel would not be unexpected.