Daily reviews


The escalating trade war fuels growth concerns, driving shares down


On Friday, China accused U.S. officials of lying to the public about their trade war. Earlier, the US put Chinese Huawei on a ban list, which triggered consequences as Google suspended Huawei's license to use Android last week.

  • The trade war escalates further, hurting riskier assets
  • Global stocks suffer from rising growth concerns
  • Huawei accuses the US of using the trade war to bully it
  • Dollar mostly lower on weak data and Fed’s dovish comments
  • EURUSD’s upside potential limited around 1.12
  • Oil prices under severe pressure on growth and demand concerns

Asian equities

Asian equity markets were lower for the week as investors remained concerned over the US-China trade tensions. The markets seem to be pricing in a longer than anticipated trade war between the world’s two biggest economies after the conflict started to escalate and the talks collapsed earlier this month. On Friday, China accused U.S. officials of lying to the public about their trade war. Earlier, the US put Chinese Huawei on a ban list, which triggered consequences as Google suspended Huawei's license to use Android last week. Huawei said that the US is using the trade war to bully it and that it's working with Google to resolve the matter.

According to the estimates from the Organization for Economic Cooperation and Development, an escalation would hurt the US economy and damage the rest of the world, shaving 0.7% from global growth by the year 2021. That's roughly $600 billion. As the trade spat continues to unnerve investors, the sell-off in riskier assets could continue should the two sides fail to deescalate tensions any time soon.

US equities

US stocks rose on Friday, but registered weekly losses as investors were still worried the US-China trade war is hurting economic growth. The Dow dropped 0.7% this week and posted its fifth consecutive weekly decline, the longest streak since 2011. The S&P 500 and Nasdaq saw a third straight week of losses, the longest slide since December 2018. Energy and tech were the worst-performing sectors for the week, with the energy sector fell 3.4%. Meanwhile, concerns over Apple’s exposure to China sent the giant’s stocks down by over 5% for the week, which added to the tech losses.

Apart from the ongoing trade war, investor sentiment was hurt by weak US economic data, as the durable goods orders dipped 2.1% in April, which was due to a combination of rising inventories and a slowdown in exports. Meanwhile, the US manufacturing activity fell to a none-year low in May, to 50.6. US overall business activity growth also faltered to a three-year low. As a reminder, the US markets will be closed on Monday due to the Memorial Day.


It was a mixed week for the euro as the currency was driven by some divergent factors. Anyway, EURUSD closed the trading week in the green as the dollar got under a widespread pressure towards the end of the week. Bundesbank said German economy is unlikely to keep growth pace in the second quarter and is still weak despite recent pickup. By the way, the data later in the week showed that German business morale deteriorated more than expected in May as confidence in the services sector worsened. Meanwhile, German PPI rose 0.5% to 105.4 versus the -0.1% slowdown in April. In the euro area, consumer confidence picked up by 0/.8 points to -6.5, while flash manufacturing PMI came at 47.7 versus 47.9 in April, at a two-month low. The ECB meeting minutes showed that the policymakers are concerned that economic growth in the euro zone is even weaker than feared. They also noted that the terms of the new banks loans - targeted longer-term refinancing operations or TLTROs - would be decided at one of the upcoming meetings.

The greenback came under pressure amid weak economic data and dovish comments by Fed’s Bullard, who said the US central bank could cut rates if inflation keeps disappointing. Meanwhile, the latest FOMC meeting minutes showed that the central bank’s patient approach to interest-rate change would be appropriate “for some time”. Many policymakers also agreed with Chairman Jerome Powell’s view that the recent dip in inflation was probably temporary. On the data front, Chicago Fed national activity index plunged in April amid factory slump, while sales of existing U.S. homes fell 0.4% in April compared with March to a seasonally adjusted annualized rate of 5.19 million units. Sales were 4.4% lower compared with April 2018, which was the 14th straight month of annual declines.

EURUSD registered a weekly high marginally above 1.12 on Friday and closed around this level. Earlier, the pair briefly dipped to 1.1106 but managed to attract buyers near the psychological support and turned positive amid a generally weaker dollar. However, the euro’s bullish potential remains limited as risk aversion could continue. On the upside, the pair needs to overcome the 1.1250 region in order to see a better technical outlook, while the key support remains around the 1.11 figure.


Concerns over less global demand sent oil prices significantly lower last week, with Brent lost nearly 5%. Traders’ behavior shows that they are increasingly worried that trade tensions between the US and China will lead to a slower global growth and less oil demand as a result. Against this backdrop, signals from Saudi Arabia that OPEC+ could extend the current production cut agreement until year-end failed to support prices. On Wednesday, Brent extended the decline after a report showed an unexpected build in U.S. crude stockpiles. The commercial crude inventories increased by 4.7 million barrels in the week ending May 17.

Then, concerns over the global economy increased after the disappointing U.S. manufacturing data, which added to the bearish pressure in the oil market, along with increasing US-China trade tensions. On Friday, prices recovered slightly after U.S. oil rigs declined, partially offsetting concerns over rising crude stockpiles in the country. However, the weekly losses were decent in general as trade war remained in market focus. Against this backdrop, the downside risks remain for now but the oversold conditions suggest that Brent could stage a bullish correction should risk sentiment improve in the days to come.