Commentary on financial markets – July 2018
Highlights:
- US: improving trade relations with EU, trade war with China continues
- Facebook: biggest share price drop in company history
Commentary:
After a wild June, the holidays brought a calm to the stock markets, which was reflected in the rise of stock indices.
While Donald Trump continues to lash out against China, he is putting on a friendlier face towards Europe, which has had a positive effect on the rise of US and European stocks. US President Trump agreed with European Commission President Jean-Claude Juncker to gradually reduce tariffs on industrial products other than cars to zero. The EU committed to import more natural gas and soybeans. The agreement would lead to a review of tariff policies on steel and aluminium.
On the other hand, Trump continues to pursue a tough policy towards China. First, he blocked the Chinese telecoms giant China Mobile from entering the US market out of concern for national security threats, and then he continued with the threat of imposing tariffs with an impact of USD 500 billion on common goods such as handbags, digital cameras, furniture and sports equipment. Prices of everyday products will rise, especially electronics and textiles. In return, China is considering restrictions on mergers of foreign companies in China, the withdrawal of licences and other retaliatory steps.
It is also worth noting the developments at Facebook, which is facing charges over the leak of user data. While the company is cooperating with investigators, the scandal is harming the company greatly. In addition, the company announced very poor quarterly results, after which the company’s shares lost almost -20%!
The price of oil has been significantly affected by the improving situation in Libya. This country is expected to start supplying 750 thousand barrels of oil per day to the market in the near future and could at least partially replace the collapsing Venezuelan production.