Advertisement
| 03 September, 2018

Stocks in red as trade tensions return

Hussein Al Sayed is the Chief Market Strategist for the Gulf and Middle East region at FXTM, and host of the popular evening business show on CNBC Arabia, Bursat Al Alam. Prior to his current role, Hussein spent many years working in the finance sector as a dealer, trader and analyst in equities, credit and foreign exchange markets. He holds a BA degree in Banking and Finance from the Lebanese International University and is experienced in both technical and fundamental analysis.

Website: http://fxtm.co/1XgYw2A

Trump may take the trade war to an unprecedented level

Last week investors hoped that positive developments between the United States and Mexico would extend further to Canada, Europe and possibly China. However, this optimism faded when the U.S. failed to reach an agreement with its northern neighbour on Friday. President Donald Trump threatened that if no fair deal is reached, Canada will be out and if Congress interferes he will terminate NAFTA entirely.

Trump may also take the trade war to an unprecedented level if he goes ahead by imposing tariffs on $200 billion worth of Chinese goods. This may come as soon as the public-comment period ends on Thursday. Beijing said it would retaliate with tariffs on $60 billion worth of US goods. If those actions go forward, almost 85 percent of U.S. goods heading to China would be subject to tariffs. Meanwhile, half of the $505 billion of Chinese imports would be impacted.

China’s Shanghai Composite and CSI300 fell by more than 1 percent on Monday, and although valuations started looking relatively cheap, investors may continue to sell China’s equities given the uncertainty surrounding the next stage of the trade war and its impact on economic growth. This may be a good opportunity for investors looking for long-term value investing. Markets should also expect to see a pullback in U.S. stocks when trading resumes on Tuesday as appetite to risk diminishes.

Advertisement

Data on Monday showed China’s manufacturing sector grew at the slowest pace in 14-months in August. The Caixin/Markit Manufacturing PMI fell to 50.6 last month dragged down by export orders which shrank for a fifth consecutive month. With the PMI index moving closer to contraction, it will be interesting to see what steps policy makers will take to boost growth.

In Europe, investors will also be looking for evidence as to whether trade tensions will drag down the final PMI readings after the slight pickup seen last month in Germany and France. However, it’s U.K. manufacturing PMI that will attract most investor’s attention as the Sterling fell back below 1.3 against the U.S. dollar.

Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.

The FXTM brand provides international brokerage services and gives access to the global currency markets, offering trading in forex, precious metals, Share CFDs, ETF CFDs, and CFDs on Commodity Futures. Trading is available via the MT4 and MT5 platforms with spreads starting from just 1.3 on Standard trading accounts and from 0.1 on ECN trading accounts. Bespoke trading support and services are provided based on each client’s needs and ambitions - from novices, to experienced traders and institutional investors. ForexTime Limited is regulated by the Cyprus Securities and Exchange Commission (CySEC), with licence number 185/12 and licensed by the SA FSB with FSP number 46614. Forextime UK Limited is licensed with the UK FCA, number 777911. FT Global Limited is regulated by the International Financial Services Commission (IFSC) with license numbers IFSC/60/345/TS and IFSC/60/345/APM.

Any opinions expressed here are the author’s own.

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© Opinion 2018