A Look Ahead in U.S. and Global Markets
Some soothing words from Federal Reserve officials have calmed a jumpy first week of September for world markets, aggravated by geopolitical tech wars that saw Apple caught in the crosshairs.
The world’s most valuable company, whose stock is up more than 36% this year, has recoiled more than 6% since Wednesday on reports China had ordered central government employees to stop using iPhones at work.
Although the extent of the ban is still unclear, it wiped some $190 billion from Apple’s market capitalization and dragged down major Wall St stock indices again on Thursday.
Coming just as China’s main rival telecom firm Huawei launched two new smartphones, and as most G20 leaders gathered in India for another fractious global summit, the Apple sideswipe also unnerved shares in major suppliers across Asia.
The stock appeared to stabilize in out-of-hours trade on Friday and Morgan Stanley analysts claimed China’s iPhone bans would at most hit Apple revenues by about 4%.
But there was also a slightly calmer market tone more generally to end the downbeat week.
Even though the latest update on U.S. employment continued to show a super-tight labor market, noises from top Fed policymakers suggested the central bank’s tightening campaign may indeed be over after all.
“We’ve got policy in a good place,” said New York Fed President John Williams, adding it was still an “open question” whether monetary policy is restrictive enough to bring the economy back into balance.
The typically more dovish Chicago Fed boss Austan Goolsbee went one further. “We are very rapidly approaching the time when our argument is not going to be about how high should the rates go; it’s going to be an argument about how long do we need to keep the rates at this position.”
Dallas Fed chief Lorie Logan showed up for the hawks. “There is work left to do,” she said.
The upshot was the rates market calmed a bit – with the odds on another Fed hike in the cycle falling back below 50% despite the red hot jobless claims readout.
That helped Treasury yields fall back too, aided by the stock market wobble and an oil price coming off the boil.
After six straight daily gains to its highest in six months, the dollar index took a breather too.
But the greenback continued to climb against China’s onshore yuan, which hit another near 16-year low on Friday after this week’s dour Chinese trade data, the ongoing property bust, a worrying sounding from its service sector and more credit easing in mortgages and loans.
China’s August inflation report is due out on Saturday amid hopes it may pull out of a brief flirtation with headline price deflation.
Friday trading was disrupted by alarming weather again in Hong Kong, however. The stock exchange there halted trading in both securities and derivatives markets due to a black rainstorm warning.
Events to Watch For on Friday:
- Federal Reserve issues quarterly financial accounts of the United States, U.S. July wholesale sales/inventories; Canada Aug employment report
- Federal Reserve Vice Chair for Supervision Michael Barr and San Francisco Fed President Mary Daly speak
- Leaders gather for weekend G20 Summit in New Delhi
- U.S. corporate earnings: Kroger
(By Mike Dolan, editing by Andrew Cawthorne; [email protected]. Twitter: @reutersMikeD)
How are the ongoing trade tensions between the US and China impacting market stability and investor confidence in sustainable growth?
To a more sustainable growth path.
The comments from Federal Reserve officials brought some relief to the markets, which had been jittery due to a combination of factors including the ongoing trade tensions between the US and China. The tech war between the two countries, with Apple being caught in the middle, added to the unease.
China’s reported ban on the use of iPhones by central government employees caused panic among investors, leading to a significant drop in Apple’s stock price and a negative impact on Wall Street indices. This ban coincided with the launch of new smartphones by Huawei, intensifying competition and further unsettling markets in Asia.
However, there were signs of stabilization in the market towards the end of the week. Apple’s stock showed some stability in out-of-hours trading on Friday, and analysts from Morgan Stanley suggested that the impact of the iPhone bans on Apple’s revenues would be limited to around 4%. This provided some reassurance to investors.
Additionally, comments from top Federal Reserve policymakers hinted at a possible end to the central bank’s tightening campaign. Despite the latest employment data showing a tight labor market in the US, policymakers recognized that the interest rates might not need to be raised further to maintain economic stability. New York Fed President John Williams stated that monetary policy is currently in a good place, suggesting that there may not be a need for more restrictive measures.
Overall, while there have been concerns and fluctuations in the markets, recent developments indicate a slightly calmer outlook. News of easing trade tensions and potential pauses in monetary tightening have helped to alleviate some of the anxieties. However, it remains important for investors to stay vigilant and closely monitor market trends as geopolitical factors continue to impact global markets.
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