Markets await FOMC meeting and Super Thursday

Weekly Report - 19/03/2018

Trump’s Policies dominate the Global Markets


The week to March 16th ended with rising fears over a potential global trade war and turmoil in the White House as President Donald Trump decided to dismiss Secretary of State Rex Tillerson; a week following Cary Cohn’s resignation as Trump’s top economic advisor.

This Week 

Anxious markets await the Fed decision on Wednesday. The weekly highlight falls on Jerome Powell as he heads for his first interest rate increase as Federal Reserve Chairman this week. The most important question investors are looking for some clues is whether the optimism about the U.S. economy could lead to more hikes than markets have prepared for.

This week is full of important meetings that could have a potential geopolitical effect. The spotlight would be on the two-day G20 summit in Buenos Aires that starts on Monday. Any signs of escalating stress between the U.S. and China could make investors nervous. U.S. Treasury Secretary Steven Mnuchin will be in a position of defending Trump’s trade plans against widespread criticism from G20 partners. Among others, the crypto-currencies use and regulation is also on the agenda of the Group of 20 finance ministers.

In Asia, equity markets traded mixed on Monday as investors are cautious this week in which the Federal Reserve is likely to hike U.S. interest rates and perhaps signal that as many as three more for the rest of the year. Investors are looking closely for any remarks from Fed Chair Jerome Powell as this will be his first press conference.

On Thursday, which is also called Super Thursday, the Bank of England interest rate decision will be reported at 12:00 GMT and Governor Mark Carney will hold a press conference shortly after the announcement. No change is expected, though the BoE could point to a possibility of an interest rate hike in May. Brexit developments will also be in focus, as a two-day European Council summit begins on Thursday, with negotiators trying to reach agreement on the transition period after the UK’s departure from the EU.


Last Week

Global trade agreements are now reconsidered after the US President announced he will reduce the nation’s trade deficit with China by $100 billion through tariffs causing the global equity markets to finish the week in the red zone.

UK markets were pulled back by losses in commodity and consumer staple stocks and the FTSE 100 index fell 0.8%.

European markets were also down, losses in banking and technology sector stocks. Meanwhile, the Euro-zone’s CPI rose at a weaker than expected pace in February, suggesting that the European Central Bank (ECB) will face dilemmas over decreasing its stimulus program through bond-buying. In addition, industrial production for the 19-nation bloc dropped below expectations in January. The EUR lost against the USD, despite a rise in Germany’s CPI in February. The German DAX 30 index managed to finish the week 0.3% higher.

In the US, Dow Jones lost 1.5% and the S&P 500 index slid 1.2%. The high turnover of the White House cabinet was among the main drivers of the markets as the Trump Administration is losing 1 senior staff member every 17 Days. US markets ended the week in the red, after President Donald Trump fired Secretary of State, Rex Tillerson amid disagreements over foreign policy. Technology and financial sector stocks dragged the equities down.

On the data docket, in February, US retail sales dropped for a third month in a row and US inflation came out in line with market expectations, boosting probabilities of gradual interest rate hikes in 2018. Moreover, US industrial production marked the highest increase in four months, and the US Michigan consumer sentiment index surged to a 14-year high in March. The USD ended mostly lower against its peers, amid fresh concerns over US political turmoil.

In the commodity markets, oil prices ended higher last week, ignoring data from the Energy Information Administration that showed an increase of US crude oil inventories by 5.0 million barrels in the week ended 9th of March.


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