Escalating trade war rhetoric unsettles global markets

Investors rode the global investing roller coaster last week as US and China stated their intentions to defend domestic markets with reciprocal tariffs. The SP 500 fell 1.4% giving back most of paring last week’s 2.1% gain while the ICE dollar index rose 0.1% for the week.

The SP 500 plunged 2.2% Monday after China announced penalties up to 25% on 106 categories of US goods overnight coming into effect Monday. It rebounded 1.3% Tuesday and extended gains 1.2% Wednesday as payrolls processing firm ADP reported that the private sector created 241,000 jobs in March, far more than expected. The broad market index added 1% Thursday as markets calmed on possibility of a negotiated settlement of the trade dispute as US and China mentioned they were ready to conduct talk. SP 500 tumbled 2.2% Friday as China responded saying it would counter US protectionism “to the end, and at any cost” after President Trump said late Thursday he was considering imposing tariffs on an additional $100 billion in imports from China.

The ICE US dollar index retreated Wednesday and Friday, advancing three other sessions last week. It inched up 0.1% Monday, gaining 0.2% Tuesday followed by 0.1% pullback Wednesday as the Institute of Supply and Manufacturing reported its services index fell to 58.8 in March from 59.5 the previous month. 3 The dollar index rose 0.4% Thursday but slid 0.4% Friday on sharply weaker than expected jobs growth: the US economy added 103,000 jobs in March, the lowest monthly growth in the last six months.

Developments in US and China trade relations after announcements about plans to impose tariffs on bilateral imports will remain in focus this week. In economic data important Inflation data from China, Japan and the US as well as Fed’s March policy meeting minutes will be released Wednesday.