Daily reviews


Trade war escalation keeps risky assets on the defensive


After Trump announced 10% tariffs on the remaining $300 billion in Chinese imports, accusing Beijing of not following through with its promise to resume purchasing farm products, China has halted imports of U.S. agricultural products.

  • The US-China trade war continues to escalate
  • Global stocks mostly under the selling pressure
  • Investors closely follow the yuan dynamics
  • The yen outperforms amid broad risk aversion
  • Dollar mostly lower on Fed easing prospects
  • Oil market under pressure from trade wars

Asian equities

After Trump announced 10% tariffs on the remaining $300 billion in Chinese imports, accusing Beijing of not following through with its promise to resume purchasing farm products, China has halted imports of U.S. agricultural products. After an earlier dip, Asian shares pushed higher on Friday as positive sentiment from Wall Street outweighed a resurfacing of trade tensions. Namely, there were reports that the White House is holding off on a decision about licenses for US companies to restart business with Huawei Technologies Co. Trump later said that the US would not do business with the company for the time being.

The MSCI Asia-Pacific Index on Friday rose 0.21 percent to 152.26, but was down 2 percent for the week. Japan’s TOPIX rose 0.4 percent, but lost 2 percent on the week. South Korea’s KOSPI climbed 0.9 percent on Friday, paring its weekly losses to 3 percent. In Australia, the S&P/ASX 200 Index rose 0.25 percent, down 2.7 percent for the week. Hong Kong stocks skid on Friday to post their third straight week of losses, weighed by protests and weak data in China. In the weekly charts, the Hang Seng Index fell 3.5 percent.

US equities

At the end of a wild week, where stocks were briefly jumping and falling amid trade tensions, US stocks stumbled on Friday as worries flared yet again that President Donald Trump’s trade war with China may be worsening. The S&P 500 dropped 1.3% after Trump said that it would be “fine” if a meeting on trade with China next month doesn’t happen, before nearly eliminating the loss. The index finished the day at 2,918.65, down 19.44 points, or 0.7%. The Dow Jones Industrial Average fell 90.75, or 0.3%, to 26,287.44, and the Nasdaq lost 80.02, or 1%, to 7,959.14. The S&P 500 is now 2.1% below its record, which was set at the end of July.

During the week, investor sentiment was mainly negative amid fears that China was raising the stakes in the trade war by weakening its currency. There were also concerns that the U.S. and China may not even meet next month to talk about their problems. All of that was followed earlier Trump’s threat to impose more tariffs on Chinese goods. Fears were pronounced in the bond market as well. Yields tumbled as investors scrambled for protection - the yield on the 10-year Treasury sat at 1.73% Friday, down from 1.85% a week ago.


The dollar was mixed during the week, appreciating against the pound and declining against the euro and the yen. EURUSD rose from lows around 1.11 to the 1.1250 area and settled at 1.12 by the end of the trading week. On the data front, Eurozone growth softened as manufacturing downturn deepened, Sentix investor confidence fell further in August to -13.7. IHS Markit Germany Services PMI showed that growth of business activity maintained in July, but outlook was the gloomiest since 2014. Also, German factory orders show unexpectedly strong rise in June, while export fell and import rose, heightening growth concerns. The ECB Economic Bulletin showed that softening global growth dynamics and weak international trade were still weighing on the euro area outlook. Despite the European reports were unimpressive, the common currency gained as further escalation in the US-China trade war increased the chance of further rate cuts by the Federal Reserve, which pressed the dollar lower.

The week was also good for the yen bulls as the trade ear between the US and China was further driving investors to safe havens including the Japanese yen, which outweighed the negative effect from another round of dovish rhetoric from the Bank of Japan. USDJPY slipped to fresh lows around 105.25 and finished below 106.00. On the data front, Japan real wages dropped for a sixth straight month in June, Japan’s current account surplus was down in 1st half on weak exports, Japan’s household spending firmed but wages were weaker. The yen was stronger due to risk aversion after the U.S. officially labelled China as a currency manipulator. Later, the sentiment has improved somehow as the PBOC made moves to limit the weakness in the yuan, lowering the demand for safe havens like the Japanese yen. Meanwhile, the Bank of Japan meeting summary showed that the central bank sees a need to discuss ideas on easing. But traders mostly ignored the dovish rhetoric from the BOJ on growing risk aversion sentiment. Towards the end of the week, risk aversion intensified on the news that the US government won’t do business with Huawei and is not ready to make a trade deal with China.


Crude oil prices decreased for the week ending August 9 as traders were focused on rising concerns over trade tensions between the United States and China, with the price of Brent crude for October delivery was down nearly 5.5 percent. Additionally, the market was rattled by an unexpected surge in U.S. inventories and production amid ongoing anxiety over ebbing global energy demand. In particular, U.S. commercial crude oil inventories increased by 2.385 million barrels during the week ending Aug. 2, defying the market forecast drop of 2.845 million barrels.

In the second half of the week, oil prices bounced back partially, as traders grew hopeful for potential oil supply cut after Saudi Arabia reportedly planned to slash exports in the near future. Saudi Arabia, said it will cut foreign sales by 700,000 barrels a day and scale back production in September, which gave investors some reprieve amid the lingering fears over weakening global oil demand. Besides, the number of U.S. active oil rigs declined sharply last week. U.S. oil rig count dropped by six to 764, marking the lowest level since February 2018. Meanwhile, in its latest "Oil Market Report", the International Energy Agency has cut its global oil demand growth forecasts for this year and next, citing fears of an economic downturn as the U.S.-China trade disputes cast a shadow over markets.