This week there was no single major event that the financial markets were influenced by. Instead, we can say that multiple smaller things happening all over the world had their impact on the main trading instruments that you are interested in. This is why we thought it would be a good idea to catalogue them all, to make sure you’re all up to date with everything.
First off, we need to turn to our topic from last week – emerging markets. We discussed how the strengthening of the dollar is exacerbating whatever internal financial issues exist in countries like Argentina and Turkey, and we also mentioned that the further increases of interest rates in the US will continue to make things worse for those countries. This week we actually saw the Turkish central bank finally try to tackle the crisis directly. Though President Erdogan has spoken time and time again against interest rates, decrying them as evil, the central bank of Turkey managed to hike them this week from 17.75% to 24%. This instantly improved the lira’s outlooks and allowed it to win back some of its lost ground. Yet the positive effects didn’t last, which means that investors have lost confidence in Turkey’s ability to solve the problem on its own. Right now analysts are arguing that what can help stop the decline in emerging markets is an end to the trade war started by Donald Trump, since that is shaking the global economy.
Regarding that same trade war, it does not seem like it’s about to end anytime soon. There are already tariffs worth $50 billion on Chinese exports, and Trump is considering adding another $200 bn worth of tariffs to that. Moreover, duties were recently added to Turkish imports (which worsened the lira’s problems) and some have suggested that Trump might be aiming at Japan next. Earlier this week the United States invited China to the negotiations table once again, likely hoping that the newest threat of more tariffs would scare them, but the Chinese state media spoke out against America’s bullying tactics. There is no indication that these talks would fare any better than all of the previous meetings between Chinese and American officials. So for now, the trade war remains a factor.
Back in Europe, another major topic of conversation is Brexit. Though the European Union representatives recently stated that they are prepared to extend an unprecedented deal to the United Kingdom, there is still surprisingly little known about what the British government is trying to achieve in that regard. The main issues of immigration and border control remain and Theresa May would be hard-pressed to get the government’s support for a deal that’s full of compromises. Yet the Bank of England is working hard to defend the country’s economy. Just today BoE Governor Mark Carney spoke about the importance of reaching a deal, stating that the opposite could be as bad for the United Kingdom as the global financial crisis of 2008.
Furthermore, it appears that this would be a weekend of quite a few meteorological disasters. The Philippines are about to be hit by the super typhoon Mangkhut, with at least 10 million people estimated to live along the storm’s predicted path. The typhoon is also headed for Hong Kong and the south of China. Meanwhile, on the other side of the world, Hurricane Florence is wreaking havoc on the American East coast. North and South Carolina are the states to be hit the hardest by Florence, and the storm is not over yet.
Please bear in mind that while natural disasters are not necessarily financial events, they can cause a lot of destruction, leading to upsets in the regular daily activities of affected countries, and that has a very tangible impact on the financial markets, especially if oil rigs are affected.