Trade war developments weigh on markets

US-China trade war dispute was the main drag on global stock market last week as tensions escalated after President Trump proposed a higher - 25% tariff on $200 billion worth of Chinese imports. Beijing responded proposing new sets of additional tariffs on 5,207 goods imported from the United States worth $60 billion.

The SP 500 gained 0.8% and the ICE dollar index added 0.5%for the week. The stock market retreated 0.1% on Wednesday as Federal Reserve concluded its two day meeting leaving its benchmark overnight lending rate in a range of 1.75% - 2.00%. The Fed signaled another hike is coming soon by stating US “economic activity has been rising at a strong rate,” instead of characterizing economy's growth rate as 'solid' like it did in its June statement.

The dollar strengthened every session last week except Monday. 3 Escalating trade war fears boosted the US dollar demand with the ICE dollar index jumping 0.5% Thursday following White House Wednesday announcement it would levy 25% tariff on $200 billion worth of Chinese imports instead of 10%.

This week the Australia and New Zealand central banks meet on Tuesday and on Wednesday respectively. No changes in monetary policies are expected. Among other significant economic events this week are the releases of the UK GDP report and the US inflation report on Friday.