Trade war developments drive market dynamics

Trade war fears dampened investors risk appetite last week as US authorities considered using current legislation or passing new stricter laws to restrict Chinese investments in US technology firms. The SP 500 lost 1.3% while the ICE dollar index inched up 0.02% for the week.

The SP 500 ended higher every session last week except Monday and Wednesday. The broad market index dropped 1.4% Monday after a report the US Treasury Department was drafting curbs that would block companies with at least 25% Chinese ownership from investing in US technology firms. SP 500 recovered 0.2% Tuesday. The big cap stock market index fell 0.9% Wednesday as orders for durable goods fell 0.6% in May. The broad market index recovered 0.6% Thursday. It added 0.1% on Friday.

The dollar strengthened every session last week except Monday and Friday. The dollar ended 0.3% lower Monday but rebounded 0.4% Tuesday as the S&P/Case-Shiller national index rose 6.4% for the year in April. The ICE dollar index jumped 0.6% Wednesday as the trade deficit in goods narrowed 3.7% in May. The strengthening slowed to less than 0.1% Thursday as the first quarter GDP was downgraded to 2% from initial reading of 2.2%. The dollar index dropped 0.8% Friday despite a rise in core personal consumption expenditures index to 2% over year in May.

On economic reports front minutes of the last Federal Reserve policy meeting due on Thursday and the US nonfarm payrolls report for June on Friday are the central economic events this week. And on the trade war news front traders will be watching for US and China moves ahead of a July 6 deadline when the US is due to impose US$34 billion of tariffs on Chinese exports.