U.S. and China cannot resume full-fledged trade negotiations due to disagreements over Huawei
U.S. and Chinese trade negotiations
Mixed comments of FOMC members
China's GDP decline
Conflict in the Strait of Hormuz
Last week the financial markets demonstrated multidirectional trading against the background of the large number of economic and geopolitical factors influence. The first half of the week was dominated by negative sentiment related to the publication of mixed statistics from China (quarterly GDP growth fell to its lowest level in the last 27 years) and reports of serious disagreements between official Beijing and Washington on Huawei. In the second half of the week, the market situation changed somewhat amidst the Fed's statements about the need to cut interest rates.
In the currency market the first half of the week was marked by strengthening of the dollar. Many investors revised their expectations regarding the further actions of the Fed. On Wednesday the market situation began to change. Pressure on the dollar was put by media reports about serious disagreements between the U.S. and China, which hinder further trade negotiations. In fact, since the meeting of Trump and Xi at the G20 summit, the parties have not held a single face-to-face meeting and have limited themselves to telephone conversations.
On Thursday, the market was very much influenced by the careless comments of the head of the Federal Reserve of New York, Williams, who made a scientific report at the university, said that it was necessary to react more quickly to the signs of economic weakness. Investors took these statements as a signal of a possible rate cut of 0.5% already at the next FOMC meeting, which led to a serious weakening of the dollar across the entire spectrum of the market.
The British pound sterling showed very volatile trading last week. On Tuesday, the GBP/USD pair updated the two-year minimum of trading, but quickly enough managed to win back all the losses, thanks to the weakening of the dollar and the publication of decent economic statistics from the UK. The support of the national currency was also provided by the British parliament decision to block the possibility for the Prime Minister to suspend the work of the parliament. This decision reduces the probability of a "hard" Brexit scenario.
Precious metals market.
Thanks to the weakening of the dollar and very careless statements of John Williams, gold once again updated its annual maximum, for the first time since May 2013 testing the mark of $ 1450. An additional support factor for gold was the situation on the stock exchanges and increased geopolitical risks associated with problems in trade negotiations between the U.S. and China and the conflict in the Strait of Hormuz.
For the oil market, the trading week was marked by a bearish trend. Over the weeks, WTI lost almost 7% of its value, and Brent lost about 6%. Negative impact on the market was caused by the news from the U.S., a significant increase in gasoline and distillate reserves, as well as reports of problems in trade negotiations between the U.S. and China. The losses were partially recovered on Friday, when the United States announced that it had shot down an Iranian drone.
Negative moods prevailed on the stock exchanges during the week. Investors are very reluctant to buy risky assets due to problems in international trade and ambiguous corporate reports. Short-term support to the indices were only provided by the comments of the head of FRB New York, which were incorrectly interpreted by the market.