Recession fears rise as trade war heats up

2 July, 2018

It has been an interesting first half for 2018. Economic fundamentals and politics took center stage as both fought for market influence. The Federal Reserve is in tightening mode as growth and inflation trended higher, while the trade war between the U.S. and the rest of the world particularly with China and the E.U. intensified further. In parallel to these events the U.S. administration provided massive stimulus to an economy that is already near full employment which led to further strengthening of the U.S. dollar.

Looking at the big picture, strong economic growth in the U.S., despite signs of softening elsewhere, provided support for equities. However, geopolitical uncertainty and protectionism remained the key downside risk. We think that we’re in the late stage of the current economic cycle, but there are no signs of a recession yet. In such economic conditions equity investors should be more cautious when investing. A more selective approach is needed as valuations are likely to be further challenged in the months ahead as volatility is further elevated.

Given that inflation will be a key factor driving monetary policies in the second half of 2018, investors need to keep a close eye on Oil prices. The decision by OPEC and non-OPEC members to raise crude supplies by about one million barrels starting from 1 July was considered a negative factor for Oil prices. However, the rise in supply from some OPEC and non-OPEC members will be met by a decline from others; doing the math here will be complicated for investors betting on the direction of prices.

Iran currently faces the re-imposition of US sanctions on its Oil exports after the Trump administration’s withdrawal from the nuclear deal. Venezuela is also on investors’ radars as there are further signs that its Oil industry is entering a dangerous new phase. Meanwhile, Libyan Oil supply is also at risk with the current political mess. These three countries together may contribute to a fall of more than two million barrels a day by the end of 2018, which is likely to keep Oil prices elevated in the second half of 2018.

Investors and traders should also keep a close eye on the U.S. Treasury yields. The gap between short- and long-term U.S. bond yields fell to its narrowest levels since 2007, and as we get closer to the inversion, the probability of a recession becomes higher.


Source link  
Deadlines are fast approaching

After a strong rally in risky assets since the beginning of 2019, anxiety and concerns over global economic growth have returned. This was evident...

U.S. Dollar on six-day rally streak

After a robust performance in 2018, the Dollar's rally was expected to come under significant pressure going into 2019. Well, that may not be so true...

Yuan marches to fresh 6 month high

It has certainly been a positive trading week for the Chinese Yuan thanks to renewed optimism over trade talks and a broadly weaker Dollar. The local currency...


Powell gives equity bulls all they need

The Federal Reserve has taken a 180-degree turn. After raising interest rates four times in 2018, the Fed said it would be patient as it determines...

A busy week ahead for financial markets

The longest government shutdown in US history is finally over at least temporarily after President Trump announced the reopening of the government...

Risk sentiment hit by IMF pessimism

A wave of risk aversion swept across financial markets today with global equities retreating as pessimism over global growth sapped risk sentiment...


Markets take a U-turn after disappointing

After a positive start to the week, Asian equities fell today amid rising concerns over the global economic outlook. The market is currently being...

EM currencies mixed despite optimism

The mood across financial markets was mixed this week as investors tussled with Brexit drama, US-China trade developments and a partial...

China stimulus extends correction

A solid kick off for the U.S. earnings season, Theresa May surviving a vote of no-confidence, China's central bank pumping record liquidity, and policymaker assurances...


In the past 24 hours Bitcoin has lost -0.08% and reached $3636.86569875. Open your trading account with the best cryptocurrency brokers on special terms today.

In the past 7 days the EUR/USD pair has lost -0.5573% and is now at $1.1277. Start trading and making money on Forex today.

In the past 7 days Ethereum has gained 7.3% and is now at $127.870029976. Have the most popular cryptocurrencies compared online 24/7.


Top Brokers offering Forex Market Analysis



Forex Currencies Forecasts



Top 10 Forex Brokers 2019

# Broker Review
1easyMarketseasyMarkets92%
2FXTMFXTM88%
3HYCMHYCM87%
4FxProFxPro85%
5FIBO GroupFIBO Group84%
6OctaFXOctaFX83%
7HotForexHotForex82%
8FXCMFXCM79%
9XMXM73%
10FP MarketsFP Markets70%
  


Share: