News
- Geopolitical tension remains the key matter to follow over the short term. At this stage, observers see a possibility of an all-out conflict between Iran and the U.S.
- President Trump has fortified military positions near the Gulf region. The US, the UK and the UAE are accusing Tehran of being behind the recent attack on two oil tankers at the Straits of Hormuz.
- In retaliation to threats, Iran has announced plans to roll back some of its commitments under the 2015 Obama-negotiated nuclear deal unless European countries take steps to mitigate effect of the economic sanctions imposed by the U.S.
Global growth driver
Despite the threat of war, what is really driving the global economy is the rising fear of a global slowdown. Financial markets have been struggling to regain positive momentum after U.S. President Trump pushed the U.S. into a full-blown trade war with China.
Oil prices also suggest a global slowdown. The attack on the oil tankers did very little to push prices higher, and Brent crude is struggling to remain above $60 against a rise in U.S. crude stockpiles and a prolonged trade war that has produced negative outcomes for both the U.S. and China.
The Commerce Department reported a 0.5% rise in business inventories, while the sales fell in April and the number of Americans filing applications for unemployment benefits rose against the expectations last week.
China’s industrial output weakened by 5% YoY in May and reached a 17-year low last week on weak domestic demand. This week, India has raised tariffs on U.S. imports, being another subject of Trump’s trade antics. The U.S. had earlier ended trade privileges for India, which had allowed duty-free exports of $6 billion worth of goods.
The Trump administration’s moves are all part of achieving his campaign promises, even when those actions threaten the economic priorities. In the light of all this, global markets are expected to remain cautious this week.