Those same financial markets experienced significant turbulence in the early part of the month. Much of this volatility was fueled by rising trade tensions between the US and China. Both countries are recently trading barbs over the other’s alleged violation of a newly established agreement brokered in Switzerland. Unfortunately, this escalation is hurting an otherwise budding relationship to the core. This double charge, along with the political implications, has reverberated through world markets, sparking huge reactions from nervous investors and others.
On March 8 th , President Trump unveiled his most extreme ploy yet, a 50% tariff on all imported steel and aluminum. This change will contribute to the continued growth of trade disputes. Market analysts are more worried about possible retaliatory strikes from China. In Europe, the Stoxx 600 index fell close to 0.3%. This drop is evidence that investors are jittery because of the growing conflict.
Still, the S&P 500 proved to be incredibly resilient last month. With downward pressures, it rallied over 6%, giving it its best weekly performance since November 2022. The Nasdaq was even stronger, up a whopping 9.6% over the same timeframe. Analysts have long attributed this rally to solid corporate earnings and rosier economic indicators. New, adverse trade developments have thrown a wrench into the prospects for future growth.
In the fixed income markets, the yield on Japan’s benchmark bond rose to just under 1.50%. At the same time, yields on both 30- and 40-year bonds firmed up considerably against shifting investor sentiment. Read stuff as they go under loaded 10-12 year US Treasury return increased 4 basis points your house. These movements represent an intricate dance between confidence in capital markets and fears about inflation and our economy’s growth prospects.
In global commodity markets, last month’s July WTI crude oil prices were near last week’s high of about $63 per barrel. This price stability is a testimony to persistent supply woes and cuts, and to the geopolitical tensions that still shape energy markets today. As a macro asset class, gold prices declined by 2% last week. They have made a comeback with a 1.8% climb today, retaking the $3350 level and hovering around there.
Economic indicators show a confusing, disappointing picture of growth. The national manufacturing sector improved marginally, registering a 49.5, up from 49.0 the prior month. All good news, but it’s still well under the whistling-past-the-graveyard line of 50, still in contraction territory. By comparison, the non-manufacturing sector posted only a slight expansion in activity, improving to 50.5 from 50.4.
Australia’s manufacturing PMI came in at 51.0, pointing to expansion in that sector, too. This figure stands as a stark contrast to the US manufacturing performance and illustrates the regional disparities in our national economic health.
This week, the Biden administration released their full budget proposal. It contains a dramatic new 3.5% tax on all offshore transfers by non-citizens, a very controversial proposal. This specific proposal has generated a wide divide between lawmakers and economists about its potential effects on foreign investment, and thus on the state of economic relations overall.
The dollar index today remains under pressure, falling to retest last week’s low near 98.70. This shift marks the currency market’s reaction to still-evolving economic data and continuing trade war. Investors have repeatedly been told that each development will be the straw that breaks global economic stability’s back, but they’ve been wrong.