Weekly Market Review - May 13-17
This week has been focusing on the impact of the trade conflicts between the US and China, which pushed investors to look for safe-haven assets like gold and cryptocurrencies. The US dollar is still getting out stronger from the current situation, adding 0.63% against the euro for the week.
The Australian dollar and Japanese yen have shown the worst results so far, as the former recorded higher than expected unemployment level while Japan’s economy is suffering from the trade tensions.
Bitcoin has shown impressive volatility this week, updating the highest price since the start of 2019 at over $8,300. However, the digital coin has lost some ground after some whales opened short positions.
China in Bad Position Amid Trade Tensions With The US
The trade tensions between the US and China have re-started as Trump activated new tariffs on goods imported from China. In response, Asia’s largest economy announced it would impose higher taxes on most US imported goods on a revised $60 billion target list. However, this is a weak counter-attack compared to the $200 billion of Chinese products on which the US has raised tariffs. People familiar with the matter told Reuters that Chinese leaders were keen to reach a deal with the US to avoid a trade war that would hit China’s long-term economic growth.
Japan’s Economy Hit by US-China Trade Tensions
According to a Reuters poll published on Friday, Japan’s exports probably contracted for the fifth month in a row in April. The likely weak performance came amid re-escalating trade tensions between the US and China. Elsewhere, capital expenditure, which will be officially released next week, might have slightly declined in March, adding to worries that companies might cut business investment. Economists anticipate Japan’s inflation to have expanded last month, though still away from BoJ’s 2% target.
US Housing Starts Rose 5.7% in April
US housing starts rose last month more than expected, with the activity in March being revised upward. Thus, it is likely that mortgage rate cuts have supported the struggling housing sector. On the other hand, land and labor shortages don’t allow builders to continue the construction of lower-priced homes at a decent pace. The Commerce Department reported on Thursday that housing starts increased by 5.7% to an annual rate of 1.235 million units in April.
Initial Jobless Claims in The US Support Labor Market
The number of American citizens claiming unemployment benefits declined more than expected last week, suggesting a steady labor market situation that might support the economy as the growth stagnates. The Labor Department said on Thursday that initial jobless claims fell last week by 16,000 to 212,000, while analysts anticipated a decline to 220,000. The four-week moving average, which is regarded as a more accurate indicator, rose 4,750 to 225,000.
German Economy Returns to Growth
German GDP rebounded in the first quarter of this year as households spent more and construction market saw increased activity. However, the government warned that the economic outlook is still uncertain due to the US-China trade disputes. German Federal Statistics Office said on Wednesday that GDP growth expanded by 0.4% in quarterly terms and by 0.7% in annual terms. Both readings are in line with analysts’ expectations.
Industrial Production in Eurozone Falls in March
Eurozone’s industrial production declined in March for the second month in a row, dragged down by lower output in France and Italy. However, German economic growth offset part of the drop. Eurostat reported on Tuesday that output in the eurozone fell 0.3% compared to February, in line with analysts’ expectations. The indicator fell 0.6% compared to March 2018. Despite the recent decline, the first quarter performance stays positive based on the 2.0% surge recorded in January.
Upcoming News to Watch
Next week, the market will watch the developments around the US-China trade relations to understand the short-term direction of global economic growth.
The US will publish reports on existing home sales on Tuesday and new home sales on Thursday.
The British pound may be shaken as the UK will come with several important economic updates, including inflation, producer price index, and retail sales among others.
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.