Trends and strings from last week’s global markets

A throwback on the remarkable movements this past week in markets.
By Markets Chimp

3/3/18 11:41 PM

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Global Equities

Trade war muddied equities' sentiment last week, forcing indices to close the week within the red territory. Investors heard out a rising tone of a protectionism that could eventually be a global growth stopper. It started with the US President announcing the imposition of tariffs on Chinese imports of steel and aluminum (Read It Here). The widely-debatable decision was the last thing US equities needed, as the market was already trying to absorb the hawkish comments by the new Fed chair Jerome Powell earlier in the week (Read It Here). However, both S&P 500 and Nasdaq 100 managed to find a grip in late Friday trading, at a time when the Dow diverged from its neighboring indices, losing for the fourth session in a row on Friday. Such a losing streak has not been seen since September 2017, as the index was pulled by a heavy sell-off in McDonald’s (NYSE: MCD) as the stock shed nearly 9% this past week (Read It Here). On a weekly basis, the Dow was down by 3.05%, S&P 500 shed 2.04%, while Nasdaq 100 slipped only 1.04%.
European stocks were unlucky as much as US equities; the same trade war fears threw its shadows over the market, combined with fresh political risks down the road. The heaviest sell-off was shared by the German DAX, giving away 4.57% and heading to its lowest level since last September 2017. The French CAC fell some 3.40%, while the UK’s FTSE was down by 2.41% for the week. The situation in Europe was the fruit of sensitive political risks, as Italian general election will take place next week. Meanwhile, the unclear fate of the ballot coalition by the Social Democratic Party in Germany fueled the violent correction last week. It's worthy to mention that news was later reported about the EU’s plans to set duets over some US big brands, such as Blue Jeans and Bourbon, making the trade war story less comfortable.
Asian equities felt the "trade war" pain as well. However, declines in Asian indices belonged to monetary policy-related actions as well. Once more, the governor of Bank of Japan pointed to the imminent end of its over-simulative monetary policy on Friday. The announcement was coupled by a big jump in yields on Japanese 10-year Treasury, jumping nearly 30% last week. As such, tightening will take from equities much of their attractiveness. Indeed, the Japanese Nikkei 225 fell by 3.21% last week. Meanwhile, Shanghai (China's index) slipped by 1.05%, when South Korea's KOSPI retreated by 2.01%.

We saw very thin gains for the US dollar this week, but it was enough for the US dollar index (DXY) to score a 2-week winning streak. As the past week marked the end of February as well, the greenback has had its first monthly gain since last October 2017. However, the US dollar rebound did hit a stumbling block last week, within the context of global trade war. The greenback was originally up by nearly 0.80% until last Wednesday. Yet, as trade war statements were let out by the US President on Thursday and Friday, the US dollar index closed the week only up by 0.11% (Read Our Technical Report). Meanwhile, the weak gains by the US dollar index were combined by massive gains on the Japanese yen this past week. The strength in Japanese yen was the result of traders buying into the story of the near tightening by Bank of Japan, eventually causing the yen to jump 1.07% versus the US dollar (Read Our Technical Report). While the euro was a bit stronger than the US dollar this week, it remained pressured by the aforementioned political uncertainties and was allowed only to appreciate 0.20% this past week. The sterling was the weakest performer among others, shedding 1.20% as it had mixed catalysts: growing post-Brexit economic worries and a sluggish momentum to bounce back.

The oil market almost replicated equities' movement since the tough correction earlier in February. Both asset classes spent the first week of February in deep declines, but later they together rebounded during the second and the third week of the month. This was before giving away notable losses within the past week. While trade wars surely will spoil the market sentiment for oil, the dominant influencer over black gold continued to be none other than the US output. Worries over excess production coming from the US were reflected in a number of market reports, as last week traders received the number of oil rigs figure. The report stated that oil rigs count climbed to as high as its highest level in about three years. While Brent oil tumbled some 4.10%, WTI crude oil dipped by 3.27% for the week. Natural gas prices continued to revive briefly, gaining 3.31% last week, completing a 3-week winning streak.

As we hinted here last week, despite the weaker performance of the safe haven, the only bright side was that it did not break out key levels yet. Such a fact carried gold to hold on throughout last week. Gold received a powerful reinforcement in the form of jittering trade environment, spelled out from rising speculation over trade war, likely to cause unrest in the majority of risk assets. While the yellow metal managed to restore much of its losses only on Friday, still gold closed the week in the negative territory, down by 0.50% to USD1,323.70.

Volatility in top cryptocurrencies was not too big. The top 10 digital currencies by market cap neither had a big surge nor a sell-off. But of course there were some exceptions, as the price for Bitcoin jumped by 17.60% last week, standing near the key level of USD11,775 (Read Our Technical Report). The week also witnessed the rise of Monero by over 30% to rank as number 10 in terms of market cap. Meanwhile, Litecoin sneaked to rank as number 5 by market cap, gaining around 5.29%. At the same time, both Ethereum and Ripple were sluggish in last week's trading.

The Week Ahead

Next week will carry to the market a set of a highly important economic events:

  • Sunday, March 4, 2018: Italian General Election.
  • Wednesday, March 7, 2018: The UK's Annual Budget Release/ Japanese GPD data.
  • Friday, March 9, 2018: Te US Jobs Report for February 2018.


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