Weak US data and threat of ‘new’ US-China trade war affect sentiment for risky assets

PRETORIA – The double whammy of weak economic data in the US given Covid-19 and the war of words between President Trump and China on renewed trade sanctions had turned market sentiment for risky assets on its head.

Although US stocks traded for most of the week on their best levels since the big correction in March 2020, as the S&P 500 index moved again higher than 3 000 last Thursday, global markets and especially emerging markets equities, exchange rates and bonds turned negative and volatile at the end of last week.

US stocks traded for most of last week, after the Memorial holiday last Monday, on stronger levels, but started to fall on Friday as investors became nervous on the back of the devastating drop in consumer spending by 13.6 percent in April from the previous month. This is the biggest monthly fall on record. 

This despite a sharp increase in US consumer income of 10.5 percent as Federal stimulus payments was paid out to US citizens. 

Financial markets on Friday were also jittery as they waited for President Donald Trump’s latest response in his escalating feud with China. The yield on 10-year Treasuries also sank.

Source: iol.co.za