U.S. stocks ended the session in red on Friday, but well off the session’s lows. Global stocks were under pressure as President Donald Trump approved tariffs on about $50 billion of Chinese goods to intensify the fears of a trade war between the United States and China. China responded to this action by announcing a $50 billion of tariffs on US goods, $34 billion to be imposed on July 6th and the remaining amount at a later date. China also threatened that it might impose tariffs on US crude oil, natural gas, coal and other refined oil products if the US retaliates. The Dow Jones futures ended the week down 0.9%, SPX500 was slightly up, whereas the Nasdaq Composite rose for the fourth consecutive week. US stocks will remain vulnerable to any development between US and China.
The United States dollar traded near a seven-month high in the busiest week of the year. The Federal Reserve hiked interest rates for the second time this year backed by the robust economic data. The dollar weakened after the FOMC rate decision and press conference as investors anticipated that the US interest rates are near their top levels. However, the interest rate guidance of the European Central Bank revealed that the divergence in the path of interest rates between the United States and Eurozone will continue to at least summer 2019, which favored the US dollar over the single currency.
The Euro depreciated more than one percent and posted its lowest weekly close in eight months post the European Central Bank meeting. The ECB kept interest rates unchanged and announced that the asset purchases will be reduced to 15 billion euros from 30 billion euros from October till December, and will end the full program by the end of December. The single currency rose on the tapering news. However, the gains faded as the ECB announced that interest rates are going to stay at their lowest level until summer 2019 and more if needed. Despite the statement of the ECB, the rate projection will remain data dependent. The European Central Bank president, Mario Draghi, will be delivering opening remarks at the ECB Forum on Central Banking in Portugal.
Gold prices dropped to the lowest levels in almost six months and posted fresh 2018 lows. Gold prices were trading in a tight range for more than three weeks. However, the different outcomes from the central banks' meetings drove gold prices out of the consolidation range. On the other hand, trade war tensions between the United States and China are back to the top which could provide little support to the precious metal. Trade war and U.S. treasury yields remain as two key drivers of the gold prices.
Oil prices fell heavily on Friday after China announced that it might impose tariffs on US crude oil imports. WTI dropped almost four percent to reach the lowest levels in two months. Oil prices were being under pressure lately due to the concerns of a rise in the oil production from different producers. The energy services firm, Baker Hughes, reported that the US oil rigs count rose to 863. The OPEC meeting is taking place on the 22nd of June in Vienna.
Major Economic Events
|12:45||US||FOMC Member Dudley Speaks|
|13:00||US||FOMC Member Duke Speaks|
|17:30||EU||ECB President Draghi Speaks|
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