Investing.com – Top 5 things that rocked U.S. markets this week.
1. Trade War Mania Grips Wall Street as Traders Flee Risky Assets
At the onset of the week, much of investor focused was expected to be centred around one man: Jerome Powell, or “Jay”, Chairman of the Federal Reserve. Jay’s testimony Tuesday, in front of the House Financial Services Committee, drew a sharp reaction in US stocks– but just not the one expected.
Powell adopted a far more hawkish view than many had anticipated, expressing optimism on the pace of inflation as well as economic growth, while directing a subtle nod Trump’s way as he said: “fiscal policy has become more stimulative.”
That sent traders scrambling as they readjusted their outlook to four rate hikes from three total rate hikes this year, sending yields soaring, and U.S. stock markets nursing heavy losses.
Powell was back in spotlight Thursday, this time in front of the Senate Banking Committee, but chose more measured language, admitting that he sees “no evidence of the economy overheating.”
US stocks, however, were into selloff mode, as President Donald Trump’s proposal to impose a 25% tariff on steel imports and 10% tariff on aluminium, stoked investor fears that the U.S.’s main trading partners would hit back, raising the prospect of a global trade war.
It wasn’t long until those fears were realized somewhat as Reuters reported Friday that the EU is considering setting duties on about $3.5 billion of U.S. imports on iconic U.S. brands such as Harley Davidson, Bourbon, Blue Jeans.
Despite reversing Friday’s losses, the Nasdaq fell to weekly loss for the first time in three weeks.
2. WTI Crude Snapped 2-Week Winning Streak
Crude oil prices snapped a two-week winning streak despite settling higher on Friday, as the number of oil rigs rose to their highest in nearly three years adding to fears of a prolonged ramp up in US oil output.
Oil prices may have settled higher on Friday, but traders harbor little hope of a sustained rebound as sentiment on oil prices remain negative after the Energy Information Administration (EIA) released data Wednesday showed U.S. crude stockpiles continued to build for the second-straight week.
U.S. production, meanwhile, rose to 10.3 million barrels per day, according to the EIA, as U.S. shale producers continued to take advantage of higher oil prices.
On Friday U.S. crude futures rose 26 cents to settle at $63.25 a barrel.
3. Euro Notched Weekly Gain; Kuroda Delivered Knockout Blow to Yen Bears
EUR/USD ended the week positive, underpinned by a sharp selloff in the dollar as the rising prospect of a global trade war halting U.S. economic growth weighed on the greenback.
Yet, sentiment on the euro is far from bullish ahead of two potentially major risk events: The result of a ballot of Social Democrat (SPD) party members on a coalition deal with Chancellor Angela Merkel’s conservatives, and the outcome of the Italian election on Sunday.
USD/JPY ended the week nursing heavy losses as Bank of Japan governor Haruhiko Kuroda said the central bank would consider exiting from ultra-loose monetary policy measures by 2019 amid high probability that inflation would hit the central bank's target.
4. Gold Prices Slump To Second Weekly Loss
Despite a sharp rise Friday, gold prices ended the week in negative for a second-straight week as gains on rising safe-haven demand amid trade war fears failed to offset losses earlier during the week.
The growing prospect of a faster pace of rate hikes continued to weigh on sentiment, forcing traders to unwind some of their bullish bets on the precious metal. CFTC COT data showed money managers cut their long bets on gold in the week ended March 2.
5. Bitcoin: This Time It’s Different
Bitcoin flirted with the $11,000 price level for much of the week, and was met with fierce resistance at each attempt to make sustained move above this price level.
Some cited the prospect of a regulatory crackdown from Bank of England muddying bullish sentiment somewhat as Mark Carney warned that the time had come to “regulate elements of the crypto-asset ecosystem to combat illicit activities.”
Others, however, said the reason bitcoin struggled to mount a sustainable move higher is because price levels between $11,000 and $12,000 continued to act as technical resistance – trading levels that trigger selling.
The technical reason appeared to support some of the moves witnessed this week as bitcoin stumbled around the $11,000 price level for most of the week.
The leg up this week comes on seemingly scant demand as the total cryptomarket cap at $457 billion – at the time of writing – remained well below $510 billion seen last week, when bitcoin rallied to a more than three-week high of $11,766 on the bitfinex exchange.
Bitcoin rose 1.89% to $11,045 on Friday as traders monitored whether the popular digital currency would be able to build on its latest move above $11,000.