Markets have continued to be unsettled by an escalation in threats over the global trade war this week, predominantly between the US and China. It became clear during the week, that due to the globalised world we live in, seemingly unconnected companies are at risk of becoming caught up in the tussle.
The European car manufacturer, Daimler, warned that its exports to China would be impacted, as they manufacture SUV’s (sports utility vehicles) in the US, with Daimler and other European car manufacturers suffering share price falls.
The US Standard & Poor’s (S&P) 500 Index fell 1.1% over the week up to 12pm London time, whilst the technology focused Nasdaq Composite index fell 0.43%. However, this disguises the record close that was hit on Wednesday for the index, with the Nasdaq having returned 12.7% year to date. The EuroStoxx 600 fell 1.4%, the UK’s FTSE All Share fell 0.2%, Japanese Topix fell 2.5%, and Emerging Markets fell 3%, with the Chinese domestic ‘A’ share market falling 4.4%. However, the Australian S&P/ASX 200 index rose 2.2% over the week as banks stocks finally attracted some buyers having fallen by just over 13% at their lowest point this year, following an inquiry by the royal commission into malpractices.
In response to President Trump’s 25% tariffs on $50bn worth of Chinese exports last week, Beijing announced over the weekend that it would retaliate, by imposing tariffs of 25% on $50bn of US exports, including soya beans, beef, whiskey, off-road vehicles, coal and crude oil. This led President Trump to announce on Tuesday the threat of further tariffs of 10% on $200bn of Chinese exports if China did not backdown, with a willingness to impose tariffs on yet a further $200bn of goods. Nonetheless, there remains a hope within markets that a compromise can be found.
The Bank of England left rates on hold at 0.50% on Thursday, however, expectations for an August rate rise were given a boost as the vote for a rise gained one more supporter this week, as Andy Haldane, the bank’s chief economist, joined those favouring an immediate 0.25% rate rise.
OPEC’s (Organisation of the Petroleum Exporting Countries) latest cartel meeting starts today with an expectation that supply constraints will be eased in the face of a rising oil price and falling supply from Venezuela due to chronic under investment. Both Saudi Arabia, and Russia, a supportive non-OPEC member, have voiced a desire to raise output.
However, Iran wishes to rebuff pressure from the US to ease the oil price. Brent crude is currently trading at $74.5 a barrel, and US WTI (West Texas Intermediate) $66.6, having previously traded as high as $79.8 and $72.2 earlier in May.
Gold fell to $1,269, a level last seen in December of last year, impacted by US rate rise expectations and a strengthening US dollar.
As if Prime Minister Theresa May wanted further evidence as to her standing in the eyes of the US President, Donald Trump’s “most important” task when he comes to the UK next month, will be to meet the Queen, America’s ambassador to the UK said on Friday.
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