19 to 25 August: Geopolitical developments to drive markets in the short-term

Last week was dominated – again – by the newsflow related to the trade tensions between the US and China. On Friday afternoon, China announced countermeasures to President Trump’s 10% tariffs on USD 300bn of Chinese goods by imposing 5-10% tariffs on USD 75bn of US imports on 1 September and 15 December. In response to the measures taken by the Chinese authorities, the POTUS lashed out at China, ‘ordered’ US companies to find an alternative location for production and raised tariffs further by 5% on all US imports from China (worth around USD 550bn of goods). Fed Chair Jerome Powell had the chance to calm the nerves of financial markets by delivering a reassuringly dovish speech at the annual Jackson Hole Symposium. Mr Powell, however, did not pre-commit to a greater degree of monetary easing. On a brighter note, President Trump claimed that trade talks between the US and the EU were on track and the parties were ‘very close to doing a deal.’ As the economic diary remains relatively empty for the week, the political newsflow could be one of the key drivers of asset prices in the short-term.

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