Daily reviews


The US-China trade war overwhelms global markets


Asian stocks were mostly lower during the week as the US-China trade tensions escalated further. China imposed new retaliatory tariffs on $60 billion worth of U.S. goods, days after the Trump administration said it would impose higher tariffs on $200 billion in Chinese goods.

  • US-China trade tensions escalate further
  • Global equities mostly lower amid the trade spat
  • Dollar outperforms due to its safe-haven status
  • US retail sales were mixed in April
  • Oil prices extend gains on geopolitics

Asian equities

Asian stocks were mostly lower during the week as the US-China trade tensions escalated further. China imposed new retaliatory tariffs on $60 billion worth of U.S. goods, days after the Trump administration said it would impose higher tariffs on $200 billion in Chinese goods. China's latest tariffs will take effect on June 1, adding up to 25% to the cost of U.S. goods that are covered by the new policy from China's State Council Customs Tariff Commission. Then, Trump referred to the escalating trade war with China as "a little squabble" and added that they have a good dialogue going. Meanwhile, a Chinese Foreign Ministry spokesman told reporters that China and the United States have agreed to continue pursuing relevant discussions. The rhetoric brought some relief to investors as Trump downplayed his escalating tariff war with Beijing and said a settlement is possible. But the selling pressure reemerged soon as Huawei Technologies and 70 of its affiliates have been placed on a trade blacklist by Washington. In turn, China's Commerce Ministry said it opposed other countries imposing unilateral sanctions on Chinese entities. The Communist Party’s People’s Daily used a front page commentary to evoke the patriotic spirit of past wars, saying the trade war would never bring China down.

As a result, the regional markets finished the week on the defensive, with Shanghai blue chips fell 2.1%, while the offshore yuan eased past 6.9400 per dollar for the first time since November, 2018. Japan’s Nikkei, meanwhile, managed to bounce 0.9%.

As for the data, China's April factory output and consumer spending weakened as a tariff war with Washington intensified. The data prompted suggestions Beijing will need to prop up economic growth with more government spending. Growth in factory output decelerated to 5.4% over a year earlier from March's 8.5% growth. Growth in retail sales declined to 7.2% over a year ago from the previous month's 8.7%.

US equities

US markets also suffered a sell-off after three days of gains but those gains were not enough to stave off weekly losses. Stocks closed lower on Friday amid reports that trade talks between China and the U.S. have stalled. The Dow Jones Industrial Average ended the day down 98.68 points at 25,764 while the S&P 500 fell 0.6% to 2,859.53. The Nasdaq Composite was down 1% at 7,816.28. It was the fourth straight weekly drop for the Dow. For the week, the Dow posted its longest weekly losing streak since May 2016, falling 0.7%. The S&P 500 and Nasdaq fell 0.8% and 1.3%, respectively.

Uncertainty over prospects for continued negotiations and the threat of a further escalation of the tariff battle capped some bullish attempts on Wall Street during the week. However, losses on the last trading day were limited by strong economic data including a rise in the University of Michigan's consumer sentiment index to a 15-year high of 102.4 from 97.2.


The dollar was higher against the majors due to its safe-haven status as concerns over the ongoing trade war and its consequences for the global economy prevailed. The economic data from the US was mixed and didn’t affect the greenback substantially. US retail sales fell 0.2% in April on a month by month basis but were still up 3.1% on a year by year count. Sales declined in April for the second time in three months, weighed down by soft sales of autos and building materials. A 1.7% increase the prior month that was the strongest gain since 2017. Sales in the “control group” subset were unchanged from the prior month, below projections for a 0.3% gain.

EURUSD finished the week lower after two weeks of gains. The pair found a bottom at 1.110 on Friday as risk aversion intensified and the USD index rose to fresh highs around the 98.00 figure, sending the common currency lower. Political issues in Italy add to the negative pressure on the euro ahead of the upcoming EU parliamentary elections. As for the data, the Euro zone core CPI for April was revised to 1.3% from 1.2%. Construction output also came in higher than expected but positive reports failed to give a lift to the common currency. Now, the 1.11 level acts as the key support and the downside risks prevail as long as the pair remains below the 1.12 figure.


Crude oil prices fell on Friday but gained for the week as the market was supported by tensions in the Middle East, which overshadowed concerns over the US-China trade war. The Saudi-led coalition in Yemen said it launched a series of airstrikes on Iran-backed Houthi rebels. The move was in retaliation for the Houthi attacks earlier this week on the Saudi’s oil infrastructure. Meanwhile, Baker Hughes reported a second straight weekly decline in the number of active rigs drilling for oil, down 3 to 802 this week. Brent registered a weekly high at $73.34 and finished around $72 on Friday.

Meanwhile, gold prices had a volatile week but finished in the red after four days of losses in a row. The bullion was under pressure despite risk aversion as the stronger dollar had hurt the appeal of the precious metal. The bullion failed to break the $1,300 barrier on Tuesday and was rejected from the tops, down to $1,274, the lowest level since May 3. Should the selling pressure persist, the yellow metal could slip towards the next important support around $1,268.