Market Report: Investors regain composure after T word sparks a sell off
Derren Nathan, head of equity research, Hargreaves Lansdown: “Just when you think it’s safe to go back in the water Donald Trump threatens to hit China with 100% tariffs in retaliation for Beijing’s export restrictions on rare earth minerals crucial to the semiconductor industry. So far, the FTSE 100, with its broad-based multinational make-up has escaped the worst of the jitters, losing less than 1% as the story broke just before Friday’s close. The London markets continue to hold their nerve this morning with the index up slightly at the open.
It’s been a more testing start to the week for the Asian markets in the eye of the storm with the tech and financials heavy Hang Seng feeling the brunt of the headwind, losing 2.7% by the afternoon.
US stock futures suggest at least a partial rebound at the open after Friday saw Wall Street suffer its worst session since April’s liberation day. Traders may be banking on a similar pattern where American indices entered a six-month period of almost unbroken growth helped by a string of trade deals, and growing hopes of a soft-landing for the US economy. Strengthening of demand for AI infrastructure also had its part to play.
With volatility back in the market, the initial flurry of third quarter earnings will be watched more closely than ever. First up, it’s the US banks, with Goldman Sachs, Citigroup, JP morgan and Wells Fargo all reporting tomorrow. A resilient economy and surge in investment banking activities bodes well, but valuations are riding high. Given the nervy backdrop, markets are likely to be sensitive to surprises in either direction.
Cryptocurrencies did little to stake their claim as a store of wealth last week. At one point, Bitcoin bottomed out over 13% lower than the all-time highs seen last week, as traders scrambled to close positions. Allegations of suspicious trading patterns highlight the risks of investing in instruments where there’s no intrinsic value and a lighter regulatory touch.
The traditional safe haven of gold has seen more robust pricing, reaching an all-time peak of $4,070 today. But, while gold does have some intrinsic value, the price has doubled in less than two years. There’s plenty of scope for a correction particularly if market fears subside. Over the long term, investors looking to protect their capital would do well to stay invested and stay diversified across a broad range of assets.
Brent crude prices have clawed back 1.4% to around $63.6 per barrel after the escalation of anti-trade rhetoric between the US and China dragged prices to an all time low on Friday. The comments compounded ongoing concerns of a glut in the market, and a narrowing of the geopolitical risk premium. As Israel welcomes back its citizens that have been held hostage for two years in Gaza this morning, the world can only hope that this is the first step towards an enduring peace.”