Markets update: War of words

Equity markets fall on trade war worries, writes Ian Slattery.

Markets fell sharply last week as trade war rhetoric from President Trump manifested into action. Whilst the full details are still materialising, equities were down on the expectation of retaliatory action from China, which is the main target of the US proposals.

The Federal Reserve raised interest rates by 25 basis points last week in a widely-expected move which evoked very little market reaction. In the accompanying statement, from new Chair Jerome Powell, the Fed appeared more upbeat about the economic outlook.

Markets fell sharply last week as trade war rhetoric from President Trump manifested into action.

Fixed income markets also took the interest rate increase in their stride, as US treasuries had fully priced in the move and further benefited from the ‘risk-off’ sentiment that was evident in markets.

The global index had its worst week since 2016, falling 5%, with the US most affected on the aforementioned trade war worries, down over 6% in euro terms.

Oil moved higher last week, and closed just short of $66/barrel. Copper was down over 3.5% whilst gold finished 2.5% higher as risk appetite waned.

The ten-year US bond yield finished the week at 2.81%, and has been in a tighter trading range in recent weeks. The German equivalent closed at 0.52%. The EUR/USD rate closed the period at 1.24 and EUR/GBP was at 0.87.