Asian markets got off to a rocky start last week, whipsawed back and forth by the possibility of a trade war being set off by U.S. tariffs on the one hand, and the announcement of a historical meeting between the leaders of the U.S. and North Korea on the other. By the end of the week investors had learned that the U.S. tariff plans would not be as harsh as originally imagined and markets calmed in the final two sessions, heading broadly higher. The U.S./North Korean news allowed South Korea’s Kospi to lead the weekly gains, rising 2.4% as some optimism crept in on North Korea’s assertion they would be ending their nuclear programs. Mainland China’s Shanghai Composite had a 1.7% gain, and both Hong Kong’s Hang Seng and the Nikkei in Japan posted 1.4% gains. The Nikkei’s gains came as the Yen softened against the U.S. dollar towards the end of the week. Australia’s S&P/ASX 200 once again underperformed, adding a modest 0.6% for the week.
The coming week could see a strong recovery from Asian markets, now that the U.S. tariff issue is beginning to fade from investors’ minds. The region underperformed globally in the past week and could see some pent up buying as a result. Japan’s market could continue to benefit from the weakness of the Yen, and in Australia there could be a relief rally if investors see demand for Australia’s raw commodities remaining strong.
European markets remained resilient all week, despite investor concerns over increased U.S. tariffs on steel and aluminum and the rising chances of a trade war breaking out. Even with concerns weighing on investor sentiment, European markets were broadly higher all week, gaining for five straight sessions, although Germany saw a slight dip on Friday. Even with that dip, the German DAX was the strongest performer of the week, gaining 3.6% on a weekly basis. The pan-European Stoxx Europe 600 added 3.0% for the week, aided by strong gains from Italian markets. In France, the CAC 40 was 2.7% higher on a weekly basis, and London’s FTSE also rose on the back of European gains, scoring five consecutive winning sessions and a 2.2% weekly rise.
With most of the headwinds surrounding tariffs and trade wars gone, European markets could be poised to score even better gains in the coming week. ECB president Mario Draghi came out with a fairly dovish speech late in the week, which helped lift market sentiment; and the Euro has been softer versus the U.S. dollar heading into the close of the week, which is also a positive for equities. The U.K. market could have a harder time of it, however, as the Pound remains strong, and recent U.K. economic data has been less than stellar.
U.S. markets remained strong for most of the previous week, although the Dow and S&P 500 suffered a dip mid-week. The Nasdaq finished out the week as the strongest index, gaining for six straight sessions and posting its first new all-time high since January 26 on Friday. For the week the Nasdaq added an impressive 4.1% as investor appetite for large cap technology names has been increasing. The S&P 500 wasn’t too far behind as it advanced 3.5%, while the Dow Industrials lagged with a gain of 3.0% due to pressure on many of its industrial components in light of a potential trade war.
The coming week could get off to a good start, with markets building on their gains following this past Friday’s release of much stronger than expected U.S. employment data. Not only did the non-farm payrolls report show 313,000 new jobs added in the U.S. in February, far outstripping the 222,000 new jobs expected; wage growth was also quite tame, allowing fears of rising U.S. inflation to melt away. Overall the stage looks set for a very good week for U.S. equities, with little negative news and all the same positive drivers in place to keep markets advancing.
Gold got pushed back and forth over unchanged levels throughout the week, finishing just slightly higher by 0.1% on a weekly basis. The moves have mostly been tied to moves in the U.S. dollar, and that can be expected to continue in the coming week. Right now the U.S. dollar looks to be firming, so gold could struggle in the coming week. Crude saw some huge moves throughout the previous week, gaining early in the week on a supply disruption and a positive demand forecast. Midweek saw crude falling 4.4% over two sessions after U.S. inventory levels rose more than expected, and U.S. production hit a new record high. Those losses were largely erased Friday on news of the U.S./North Korean meeting and a drop in the number of active rig counts for the first time in seven weeks. When all was said and done, crude advanced 1.1% on a weekly basis. The coming week will most likely see the same volatility in crude markets, but overall the trend remains higher for crude. Traders will need to exercise caution around news releases.
|18:00||USD||Federal Budget Balance|
|00:10||AUD||RBA Assist Gov Bullock Speaks|
|00:30||AUD||NAB Business Confidence|
|11:30||GBP||Annual Budget Release|
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|14:15||CAD||BOC Gov Poloz Speaks|
|22:10||AUD||RBA Assist Gov Kent Speaks|
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|08:00||EUR||ECB President Draghi Speaks|
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|12:30||USD||Empire State Manufacturing Index|
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|22:45||AUD||RBA Assist Gov Debelle Speaks|
|04:30||JPY||Revised Industrial Production m/m|
|10:00||EUR||Final CPI y/y|
|12:00||GBP||BOE Quarterly Bulletin|
|12:30||CAD||Foreign Securities Purchases|
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|14:00||USD||Prelim UoM Consumer Sentiment|