Daily reviews


Trade war, political uncertainty make investors feel uncomfortable, dollar rallies


Asian stock markets saw a second straight week of losses as the release of a whistleblower complaint against U.S. President Donald Trump heightened uncertainty about the global economy, in addition to US-China trade war and lower oil prices.

  • Stocks finish a choppy week mostly lower
  • US-China trade uncertainty persists
  • Political drama in Washington weighs markets
  • Dollar rallies across the board on safe-haven demand
  • Oil prices extend losses, derail the $60 barrier

Asian equities

Asian stock markets saw a second straight week of losses as the release of a whistleblower complaint against U.S. President Donald Trump heightened uncertainty about the global economy, in addition to US-China trade war and lower oil prices.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.09% on Friday, having fallen nearly 1.5% for the week. According to the whistleblower report, Donald Trump abused his office in attempting to solicit Ukraine’s interference in the 2020 U.S. election for his political benefit and also tried to “lock down” evidence about that conduct. As a result, the U.S. House of Representatives Speaker Nancy Pelosi launched an impeachment inquiry into Trump last week, which made investors worried. Given the Republican majority in the Senate, there will hardly be a vote for his impeachment but a long investigation process itself could dampen market sentiment down the road.

On Friday, Japan's Nikkei 225 and South Korea's Kospi fell 1.3% and 1.2% respectively. Hong Kong's Hang Seng index lost 0.3%. China's Shanghai Composite index was nearly unchanged. On the data front, profits at China's industrial companies dropped 2% in August from a year ago, after a 2.6% gain in the previous month. As a reminder, China markets will be closed for most of the upcoming week.

US equities

In the US, political crisis in Washington coupled with contradictory signals from the trade front, sent stocks to three-week lows, with the S&P 500 fell 1.1% on the week. On Friday, the downside pressure increased amid the reports that the Trump administration is considering sweeping limits to capital-market investments. The S&P 500 index fell 0.5% and remains 2.1% below its all-time high set in July. The Dow Jones Industrial Average dropped 0.3%, and the Nasdaq lost 1.1%, to 7,939.63.

In other news, trade war talks were scheduled for October 10-11 in Washington, while China’s top diplomat said China was willing to buy more U.S. products. On the other hand, reports that the United States is unlikely to allow American firms to supply China’s Huawei Technologies undermined investor optimism over a potential deal.

As for the data, spending by U.S. consumers rose 0.1% in August, the smallest gain in six months, while incomes increased at a solid pace. Another report showed orders to U.S. factories for big-ticket manufactured goods rose slightly last month. Data on Thursday showed that the U.S. economy grew at a 2% annual rate in the second quarter, a sharply slower pace than earlier the year.


It was a mixed week for the dollar amid geopolitical headlines, economic news, and comments from Fed officials. Overall, the USD ended as a net winner against other major counterparts. On the data front, flash U.S. Manufacturing PMI came in at 51.0 versus 50.3 in August, registering a 5-month high. The Richmond Fed composite index dropped from 1 in August to −9 in September. The Conference Board consumer U.S. confidence index decreased in September to 125.1, down from 134.2 in August. Philadelphia Fed non-manufacturing survey increased to 9.5 in September versus 7.5 in August. Second-quarter U.S. GDP stayed at 2%. Wholesale inventories for August came in at $681.9B, up 0.4% from July. Pending home sales rose more than expected in August. Personal income increased 0.4% in August after +0.1% in July, while consumer sentiment improved but still showed slow erosion.

Meanwhile, the Federal Reserve officials sent some mixed signals to investors. In particular, Fed’s Daly said rate cuts were helping to offset headwinds, Bullard noted that U.S.-China trade relations probably had to come to a head, and the end of an era of free trade is imperiling the U.S. economy. Evans, in turn, said that two rate cuts have Fed ‘well-positioned’ at this point. According to Kaplan, global economy is ‘fragile’ but U.S. will ‘skate through’, and Harker highlighted that the central bank should ‘hold firm’ on rates.

Against this backdrop, the EURUSD pair quickly dipped below the 1.09 handle amid a combination of weak German data and risk aversion. The euro finished above the mentioned level but suffered heavy weekly losses and remains under the selling pressure as long as the pair stays below 1.11. USDJPY meanwhile failed to challenge precious week’s highs around 108.50 but still managed to finish above the 100-DMA around 107.80 and could make fresh attempts to break above the 108.00 level in the days to come.


Crude oil prices fell on Friday and registered weekly losses amid trade-related uncertainty, faster-than-expected recovery in Saudi output, as well as growing worries about global crude demand amid weak Chinese economic data. Saudis have already restored capacity to 11.3 million barrels per day. Brent quickly dipped below the $60 handle and finished marginally above the $61 level. Prices fell 3.7% for the week - the biggest weekly loss since early August.

The selling pressure increased after the reports that the U.S. government is considering the possibility of delisting Chinese companies from U.S. exchanges. This step would be an escalation of trade tensions between the two countries. The news that Saudi Arabia had agreed a partial ceasefire in Yemen added to the negative sentiment in the market. Meanwhile, the IEA said it might cut its estimates for global oil demand for 2019 and 2020 should the global economy weaken further. Considering all these factors, Brent could see further losses in the short term should risk sentiment fail to improve any time soon.