Rising US interest rate expectations leads to a mixed week in markets. It was a mixed week for markets as expectations rose for a more hawkish United States Federal Reserve after robust retail sales data was released for April. The US dollar resumed its recent upward trend versus a basket of internationally traded currencies.
Despite last minute lobbying from European leaders, President Trump pulled out of the landmark nuclear deal with Iran, vowing to re-impose sanctions on Tehran. This sent the oil price to its highest level since late 2014 with Brent crude oil briefly touching $78 a barrel, before settling back to $77.4.
Global equity markets rallied throughout the week, as geopolitical tensions seemed to ease. Investors were particularly relieved, when air strikes on Syria conducted by the US (United States), France and the UK (United Kingdom) were relatively constrained without further escalation. Moreover, investors’ attention has now turned to corporate earnings season which is now well under way.
Markets recovered last week as investors appeared to take a more optimistic view over fears of a potential trade war between China and the US. The Chinese President, Xi Jinping, delivered a broadly conciliatory tone in a speech at the Bo’ao Forum for Asia, promising to open China’s economy further by reducing barriers to trade and investment.
Concerns over the escalating trade dispute between China and the United States (US), dominated headlines again. The second quarter opened with a poor start with the S&P 500 and the Dow Jones Industrial Average both closing on Monday more than 10% below January’s high.
The week started negatively for European Equities as markets reacted to comments from German central bank chief, Jens Weidmann, that the European Central Bank should slow its crisis-fighting policies of extremely low interest rates and large bond purchases.
Protectionism leads markets lower. News flow over the week quickly moved on from data privacy concerns over Facebook to protectionism as the United States (US) Trump administration announced the latest round of import tariffs, targeting $60bn of Chinese imports on the charge of Beijing pursuing a strategy of unfairly acquiring US intellectual property.