Kuwait: August 09, 2018
US GROWTH POWERS AHEAD, BUT TRADE WAR WITH CHINA INTENSIFIES
The economic news flow over the past month was dominated by ongoing global trade tensions and the implications for growth. Although the US and the EU announced a truce on further tariff increases, the USChina dispute has escalated, with both sides threatening fresh measures including the US proposal to impose 25% tariffs on $200 billion in imports from China – around 40% of the total. Partly reflecting trade concerns, the Chinese currency has plunged in recent weeks.
Despite intensifying risks to trade, global central banks are continuing the gradual “normalization” of monetary policy amid still decent growth figures and rising inflation; the Bank of England was the latest to push rates higher in August despite uncertainty over Brexit and the US Fed is likely to raise rates again in September.
Global equities in July broke their negative streak closing up 2.9% as measured by the MSCI All Country World Index. In the US, both major indices, the Dow Jones and S&P 500, closed in July up 4.7% and 3.6%, respectively. During the month, several announcements provided support to the markets such as the jobs report and earnings announcements. Talk of trade wars continues to take center stage with US rhetoric on imposing tariffs reaching new highs with regards to both the EU and China. Issues have taken a turn for the better with respect to the EU, yet with China President Trump hinted on implementing tariffs on total Chinese imports of USD 500 billion. Despite the trade issues engulfing the US, Chairman of the Federal Reserve made it clear that rates will continue to rise steadily given the strength of the economy.