The US-China trade war is dominating global economy
US-China trade war is dominating global economy
Although the markets were relieved midweek with the announcement that the US was delaying the imposition of tariffs on various categories of imports from China until after their holiday season, the news did not stop China from announcing its intention to take countermeasures matching US tariffs.
The US-China trade war is dominating global economic news and the effect is affecting all global markets. Although the markets were relieved midweek with the announcement that the US was delaying the imposition of tariffs on various categories of imports from China until after their holiday season, the news did not stop China from announcing its intention to take countermeasures matching US tariffs. Negotiations are expected to resume in two weeks’ time, with China’s request to the US to meet it halfway on trade issues. The Goldman Sachs Group is raising concerns of a US recession as the trade war with China intensifies, boosting the impact on economic growth.
Global bond yields continued to tumble, with the US 10-year notes falling to their lowest level in three years, while German, British and Japanese yields fell to record lows. The US 30-year bond yield fell to below 2% for the first time on record. Both the US and UK bond yields inverted the past week, which means that short-term rates are higher than longer-term paper. The last five inversions have eventually led to recessions, on average 22 months following such and inversion of the US yield curve.
Air traffic out of Hong Kong was severely disrupted the past week, as protestors occupied the city’s international airport and clashed with police. The prolonged nature of the protests has resulted in Hong Kong’s government suggesting it will downgrade its forecast for gross domestic product to 0% to 1% this year from its earlier 2% to 3% forecast.
Locally, the downward phase of the South African business cycle likely entered its 68th month, according to data contained in the latest BankservAfrica Economic Transaction Index for July.
The negative local and global economic news had a major effect on markets, and most indices closed lower. The JSE all-share index (ALSI) closed 2.82% lower for the week, the US S&P lost 1.03% and the UK FTSE 100 closed 1.88% in the red.
Markets suffered substantial value losses in the past four weeks and any positive news could have a major impact on index values in the coming weeks.
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