Asian markets underperformed this past week as investors worried about the initiation of U.S. and Chinese trade tariffs on Friday. Ironically, Friday was the strongest day for Asian markets, but not nearly strong enough to keep almost every market from posting a weekly loss. Australia was the exception, with the S&P/ASX 200 up 1.3% for the week as investors down under shrugged off both the trade concerns and falling metals prices. Mainland China’s Shanghai Composite understandably had the worst loss, falling 3.6% and posting the seventh consecutive weekly loss. Hong Kong’s Hang Seng also fell, but by a more modest 2.2%, and both Japan’s Nikkei and the Kospi in South Korea were 2.3% lower for the week.
It will be interesting to see what markets do in the coming week. Both China and the U.S. instituted their new tariffs on Friday, and markets seemed to have shrugged it off. Analysts are suggesting that investors are becoming complacent, or simply accustomed to the continued trade woes. If that’s truly the case we could see a strong week coming for Asian equities, as most markets could see a strong rebound after weeks of being depressed. We do still believe gains are questionable for Chinese markets, since they are also facing the potential for a slowing economy, outside trade concerns. Tuesday is the day to watch, with Chinese inflation data being released.
European markets remained rattled by trade tensions throughout the week, but not sufficiently to cause another week of losses for the most part. The pan-European Stoxx Europe 600 finished with four consecutive winning sessions and posted a 0.6% gain for the week. Germany, the export leader of Europe, performed even better as it added 1.6% for the week after news emerged that the U.S. and Europe could avoid auto tariffs that would seriously impact the German automakers. The CAC 40 in France gained as well, tacking on 1% for the week. The weakest market was in the U.K., where the FTSE ended with a 0.3% weekly loss, despite rising for the final two sessions of the week.
The coming week features very little economic data from the European Union, but we will get manufacturing data out of the U.K. on Tuesday. Investors will be looking for signs of weakness in the economy; and if they find them, these could send equities lower. European investors will have little to focus on outside the trade tensions between the U.S. and China, and perhaps between the U.S. and the European Union. If that becomes the case, expect sharp selling from European investors throughout the week.
U.S. markets were the most resilient of the global equity markets last week, with the week split by a holiday, and investors returning in the second half of the week with little concerns for trade policy or the potential for a trade war. By the end of the week the Nasdaq outperformed as it rose 2.4%, while the S&P 500 advanced 1.5% and the Dow Industrials added 0.8%.
It’s hard to believe that U.S. investors will continue to ignore trade tensions, so we are very likely to see pockets of weakness in next week’s trading sessions. Our analysts don’t believe that weakness will occur at the start of the week, however, as investors will likely still be excited over the Friday non-farm payrolls data, which was about as perfect as possible. Wednesday and Thursday will bring inflation data, and that could derail markets if it comes in too hot.
Gold found some strength mid-week, which was enough to help it avoid a weekly loss as it tacked on 0.1% for the week. It still remains under extreme pressure, and the Friday jobs report was no help, as the strong jobs report signals that the Fed will remain on track, which will keep traders bearish where gold is concerned. The coming week will likely begin with more weakness for gold, but traders could see some relief mid-week if the PPI or CPI numbers come in weaker than expected. It isn’t too likely, however, so look for gold to continue tacking lower towards the $1,200 handle.
Crude bounced back and forth, ending the week with a loss for the first time in three weeks, as a surprise rise in U.S. crude inventory levels for the first time in four weeks put heavy pressure on the commodity. The U.S. benchmark West Texas Intermediate crude lost 0.5% for the week, but the global benchmark Brent crude fell 2.7% for the week.
The coming week will almost certainly feature continued volatility in crude markets as traders continue to switch between optimism over rising demand and supply disruptions, and pessimism over increasing OPEC and Russian production, as well as the calls from the White House to raise production even further in an effort to drive crude prices lower.
|06:00||JPY||Economy Watchers Sentiment|
|07:00||EUR||German Trade Balance|
|08:50||GBP||MPC Member Broadbent Speaks|
|09:30||EUR||Sentix Investor Confidence|
|02:30||AUD||NAB Business Confidence|
|09:30||GBP||Manufacturing Production m/m|
|09:30||GBP||Goods Trade Balance|
|09:30||GBP||Industrial Production m/m|
|10:00||EUR||German ZEW Economic Sentiment|
|13:30||CAD||Building Permits m/m|
|01:30||AUD||Westpac Consumer Sentiment|
|13:30||USD||Core PPI m/m|
|15:00||CAD||BOC Monetary Policy Report|
|15:00||CAD||BOC Rate Statement|
|15:30||USD||Crude Oil Inventories|
|16:15||CAD||BOC Press Conference|
|16:35||GBP||BOE Gov Carney Speaks|
|07:00||EUR||German Final CPI m/m|
|07:45||EUR||French Final CPI m/m|
|9:30||GBP||BOE Credit Conditions Survey|
|All Day||EUR||Eurogroup Meetings|
|12:30||EUR||ECB Monetary Policy Meeting Accounts|
|13:30||USD||Core CPI m/m|
|19:00||USD||Federal Budget Balance|
|All Day||EUR||ECOFIN Meetings|
|12:00||GBP||MPC Member Cunliffe Speaks|
|15:00||USD||Prelim UoM Consumer Sentiment|
|16:00||USD||Fed Monetary Policy Report|