Weeks go by and look the same for global stocks despite the backdrop of negative sentiment towards endless trade jitters. Broad-based indices were up again last week (S&P 500: +0.78%, MSCI EMU: +2.12%, MSCI EM: +2.23% in US dollar, US markets accounting for the bulk of capital inflows) though President Trump announced on Monday that he will put 10% tariffs on $200bn in Chinese goods while sparing a wide set of consumer technology products (including Apple) which were considered the most exposed to the ever-escalating trade war. Unsurprisingly China retaliated against the new US blow, slapping duties of 5% to 10% on $60bn of American imports (meat, chemicals, clothes and auto parts especially). In a first time, investors seemed to deem this latest escalation less damaging than initially feared, hence the midweek stock rebound. However, to make matters worse, China decided to cancel talks with the United States at the end of the week. In the same vein, U.S.-Canada talks about the three-nation North American Free Trade Agreement (NAFTA) stalled as confirmed by Canada’s Foreign Affairs Minister Chrystia Freeland even if she told reporters negotiations had been “constructive”. Similarly talks between the UK and the EU came to a deadlock. The British pound tumbled 1.5% on Friday and headed for its biggest daily drop this year against the dollar. Meanwhile, the 10-Year Treasury yield quickly broke the 300bp threshold and the WTI crude oil climbed well above $70 per barrel after Saudi Arabia and Russia’s refusal to step up their oil production, thereby rebuffing Trump’s call for action to cool the market.
Find the full report here: https://www.trackinsight.com/weekly-flow-report/2018-09-21/global