Asian markets were mixed for the month of August, and finished the week on a down note, but still were mostly higher on a weekly basis thanks to a strong start to the week. The end of the week blues came after U.S. President Trump reaffirmed his intention to go ahead with tariffs on $200 billion in Chinese goods. The Shanghai Composite was hardest hit by the news and ended the week flat but down 5.25% on a monthly basis. Hong Kong’s Hang Seng was also negatively impacted by the trade news but still had a 0.8% weekly gain, although it was 2.4% lower for August. In Japan, the Nikkei gained 1.2% for the week after snapping an eight session winning streak. For the month of August the Nikkei was 1.4% higher. South Korea’s Kospi has also gained in ten of the last eleven sessions and finished the week 1.3% higher and the month – 1.2% higher. In Australia the S&P/ASX 200 rebounded from the weakness of the previous week and gained 1.2% on a weekly basis and 0.6% on a monthly basis.
The coming week will continue to be a struggle for Chinese and Hong Kong markets as the U.S. tariffs go into effect on September 6. This could cause strength for the Yen in Japan as well, which will be bad for Japanese equities. The Nikkei seems to see increased weakness when the Yen drops below the 111.00 level. South Korean markets have been on a tear, and there’s no fundamental reason to see that end yet. And in Australia markets have benefitted from a weaker U.S. dollar and rising commodity prices, but that trend could slow in the coming week, putting some pressure on Australian equities.
European markets were looking to finish the week higher, but steep losses on Friday in response to concerns over U.S. trade policy led to broad based weekly losses for major European indices. The pan-European Stoxx Europe 600 ended with a 0.3% weekly loss and was also down 2.4% for the month of August. In Germany the DAX also fell 0.3% on a weekly basis but was 3.5% lower for the month, as it has been most sensitive to U.S. trade concerns. The CAC 40 in France ended the week with a 0.5% loss and was the best performer in the region for August, falling just 0.9%. In London the FTSE underperformed European markets, losing 1.9% on a weekly basis. For the month of August the FTSE put in its worst monthly performance since August 2015, falling 4.1%.
The coming week isn’t likely to provide much respite for markets. The U.S. tariffs on Chinese goods goes into effect late in the week, and that will continue to weigh on European markets, particularly Germany’s DAX. There are also ongoing concerns over Italy as it gets ready to draft a budget, and investors worry that the new budget will conflict with EU deficit rules. And in London the FTSE will almost surely continue to see pressure from Brexit concerns, although Pound weakness from the end of this past week could help mute losses.
U.S. markets were mixed on Friday, but had strong weekly and monthly gains. For the week the Nasdaq was up by 2%, while the S&P 500 and Dow Industrials both gained 0.6%. Monthly gains were equally impressive as the S&P 500 tacked on 3% in August, while the Dow rose 2.2% and the Nasdaq jumped 5.7% higher. Markets were helped by strong corporate results early in the month and then investor hopes, following the trade deal between the U.S. and Mexico at the end of the month.
The coming week could see some choppy and volatile trade as investor’s focus will almost certainly be on the U.S. tariffs on Chinese goods. There was also no resolution to the trade talks with Canada last week, and that will likely weigh on investor sentiment. In addition, economic data could whipsaw the market somewhat. And finally we always have the question mark of what President Trump might say…
Gold gained modestly on Friday but still ended with a weekly loss of 0.5%. For the month of August gold was 2.2% lower, suffering its fifth consecutive monthly decline, which is the longest streak of monthly declines in over five years. The strength of the U.S. dollar has been a drag on gold, but the prospect of higher U.S. interest rates is also a factor in the weakness of the yield-less asset. There’s nothing that’s fundamentally changed, so the coming week is likely to be more of the same for gold. One caveat is that with gold above the $1,200 level again, that could be a floor, which might mean we see a tight trading range for the precious metal in the coming week.
Crude ended the week on a down note as concerns over U.S. trade policy had traders worried about falling demand, but the weekly and monthly results were still good as traders have been preparing for supply disruptions from Iran. On a weekly basis the U.S. benchmark West Texas Intermediate crude gained 1.6% while adding 3.2% on a monthly basis. The global benchmark Brent crude was up 2.2% for the week and gained 4.4% in the month of August. The coming week could see crude take a pause, as it has made solid gains recently, and traders may be ready to take some profits in light of the concerns over U.S. trade policy.
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