Weekly Market Review - August 19-23
This week, global equities haven’t been volatile. The stock markets reacted on Friday as China announced additional tariffs on US goods while Trump fired back. Thus, the US S&P index tumbled 2.59% on the day, losing over 1.5% over the week.
The US 10-year Treasury note increased by six basis points to 1.60% compared to last week.
In the commodity market, the price of WTI crude oil fell $1.5 to $53.65. Gold and silver surged almost 2% on Friday on trade tensions news.
In the crypto space, Bitcoin is still trading close to $10,000, waiting for significant signals to decide the next big move, whether it’s another bullish rally or major correction.
US-China Trade War Goes on
The Sino-US trade tensions re-escalated on Friday, as China’s State Council said that the government would impose more tariffs of 5% to 10% on additional “made in USA” goods starting from September 1. US President Donald Trump reacted promptly through his Twitter profile, saying that American companies should look for alternatives to Asia’s biggest economy. The President wants local companies to bring part of the businesses back to the homeland. The stock markets plummeted on the news, with S&P 500 losing 2.59% on Friday.
Fed Has no Plan For Sino-US Trade Conflict
Jerome Powell, Chairman of the US Federal Reserve (Fed), said during an annual meeting of global central bankers that the Fed would take all necessary measures to support the US economic growth. However, he implied that central banks face serious challenges caused by the trade conflict between the US and China. Powell admitted that he didn’t like the way Trump’s policies against China are impacting the American economy. Moreover, he revealed that the Fed had no real plan on how to handle the situation.
BoE Governor Wants USD Replacement
Mark Carne, Governor of the Bank of England (BoE), said that the global economy should cease its reliance on the US dollar. The head of the BoE said that the American currency had a destabilising role in the world economy, especially by leaving room for a liquidity trap fueled by ultra-low interest rates. Instead, the central banks across the world should join their forces to come with a replacement reserve currency. He warned that such low rates in the past coincided with financial crises, wars, and major shifts in the banking system.
ECB is Ready For Stimulus Measures
The European Central Bank (ECB) published on Thursday the minutes of its last meeting in July. The ECB concluded that the European economy would need a mixture of stimulus measures to boost the eurozone’s gross domestic product (GDP) given that recent indicators point to an economic slowdown. EBC President Mario Draghi, who will leave the position for ex-FMI head Christine Lagarde soon, said that we might see the first supportive measures as early as this September, citing slowing GDP growth and inflation.
German Govt Anticipates Recession
The German government anticipates an economic recession for the third quarter of this year, according to Der Spiegel, citing an internal document. The magazine said that the government expectations for the three months through September would slightly contract. German GDP declined 0.1% in the three months through June, driven by a drop in exports. However, the government doesn’t predict an economic crisis if the trade tensions maintain at this level, and the UK leaves with a deal.
US Mortgage Rates Decline to Lowest Level Since Nov 2016
The costs on US 30-year and 15-year mortgages declined to the lowest levels in almost three years, according to Freddie Mac. The government-sponsored company cited trade tensions between the US and China and general worries about an economic recession as the main drivers behind the decline. Analysts said that lower fixed-rate mortgages would boost home sales and stoke refinancing, eventually supporting US consumers’ balance sheets. The rate on 30-year mortgages fell this week to 3.55% from 3.60% last week while the rate on 15-year mortgages dropped to 3.03% from 3.05% for the same period.
Upcoming News to Watch
Next week, all eyes will be on the G7 meeting in Biarritz, France. The summit starts this Sunday and will gather the representatives of 7 most dominant countries in the world.
On Monday, the US will release data on durable goods orders. On Thursday, the country will report on its economic growth, initial jobless claims, and pending home sales. Canada will publish GDP data the next day.
Also, on Friday, the eurozone will report on its consumer prices index (CPI) and unemployment. Elsewhere, Japan will publish data on industrial production and retail sales.
The UK markets will be closed on Monday in observance of the Summer Bank Holiday.
Anatol has been writing for our news site for a year and is the newest member of our team. While he’s new to us, he’s certainly not new to trading with over 10 years’ experience being a professional financial journalist and working in the markets. Learn more.