Weekly Review: A Look at The Major Stories for the Week
This week, the focus among traders was on trade, Brexit, the minutes from the Fed meeting, and the stability of the European Union.
On Monday, Germany’s interior minister announced that he would step aside if Angela Merkel didn’t negotiate with him. This happened after last week’s meeting among the leaders of the European Union about immigration. At the meeting in Brussels, Merkel agreed on the measures meant to reduce the number of migrants who end up in Germany. The minister’s announcement was a big blow to the chancellor and the euro. On Tuesday, it was a relieve for the two after he accepted the new proposals. This gives Merkel a win at the current stage but it also presents fresh risks for the European Union.
On economic data, traders were waiting for the factory order data from Germany. These numbers were important because they gave traders an indication of what is going on in the EU’s biggest economy. The numbers were encouraging because for the first time in a few months, the factory orders rose by 2.6%. Traders were expecting a modest 1.1% gain. Today, as a sign of the country’s manufacturing industry, the country’s industrial production numbers were 2.6%, which was better than the expected 0.3%. This means that the country’s main segment of the economy is doing well.
On trade, there was an expectation that the United States and China would try to salvage the current trade conflict. This did not happen, and the two countries started implementing tariffs early today. This turns from being a trade conflict to a trade war. As you recall, Donald Trump has promised to retaliate China’s retaliation. China too has announced that it will respond to the US tariffs with equal tariffs. This has hurt the price of major commodities like corn and soybeans as shown below.
Traders were also focusing on the price of crude oil. On Saturday, Donald Trump had a phone call with Saudi King who agreed to add oil output by an additional 2 million barrels. This week, the price of crude has traded in a sideways direction as traders estimate the supply dynamics on the price. There was also a major news about the future of the Saudi Aramco IPO. In recent years, Saudi Arabia has been pushing an IPO for the oil giant. Today, Wall Street Journal reported that the deal might not happen after all. The deal will raise more than $100 billion during the IPO but government officials are scared about the increased scrutiny the country will have. A senior official at Aramco said that it was unlikely that the IPO will happen. If it does not happen, it will be a big blow to investors who wanted to trade one of the biggest companies in the world.
Today, traders will get the jobs numbers from the United States. These numbers will show them the progress the country is making at a time when it has become difficult for employers to find people to hire. As such, the dollar will be a major focus today. This week, the dollar has dropped as traders worry about the impact of the trade war.
On Brexit, traders focused on the political issues emerging from the UK as Theresa May prepares to meet her cabinet officials tomorrow. This meeting will be difficult for her because the officials are not in the same page about Brexit. Already, a few companies have expressed fear about the implications of a hard Brexit to their industry.
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