Politics, Trade Plague the Markets Once Again
After an up and down week, Friday is proving to be a volatile day on the markets once again. Per the reasons behind the rocky ride are numerous, although in this case they can mostly be narrowed down to two things: political and trade threats. In those two could be combined as simply “uncertainty” as the President faces a Congressional challenge and the trade front with China continues to change with each passing hour.
Starting with the purely political side of things, there’s no doubt that it’s been a rough week for the President of the United States. Following a report accusing the Commander in Chief of pressuring the Ukrainian president into providing dirt on former Vice President Joe Biden, things have ratcheted up considerably in recent days. Currently Speaker of the House Nancy Pelosi is leading a formal impeachment inquiry in Congress. While observers have doubts about whether President Trump would actually be removed from office following a potential impeachment, the threat has taken a toll on the markets in recent sessions.
That said, as the impeachment saga was heating up earlier this week, the markets managed to stage a rally following word from the President that a trade deal with China could be done “sooner than you think,” adding that Chinese officials “want to make a deal very badly.” Trump went on to tell reporters, “You know why they want to make a deal? Because they’re losing their jobs, because their supply chain is going to hell and companies are moving out of China and they’re moving to lots of other places, including the United States.”
Unfortunately for free traders, this morning’s news cycle brought word that the White House was considering blocking U.S. businesses from making investments in Chinese companies . Sources tell CNBC that plans for such a ban are in preliminary stages and that there’s currently no timetable for the potential enacting of such rules. The White House declined the network’s request for comment.
In addition to this news seemingly impacting the U.S. markets on the whole, stocks like Alibaba and Baidu were hit particularly hard. Moreover the Chinese yuan weakened against the dollar. Summing up the current situation, ThinkMarkets FX chief market analyst Naeem Aslam wrote in a note obtained by CNN Business, “The trade war has just transformed its narrative altogether and it has turned into insanity. The recent news about Trump administration possibly stopping US investors to invest in China has brought the biggest nightmare of the year. If this becomes a reality, the retaliation action by China is going to be far more significant.”
With the news coming fast and furious out of Washington this week, it would seem that Wall Street has had a tough time keeping up. Following what appeared to be positive trade news just a few short days ago, this latest report is currently causing chaos. Of course, as we’ve seen plenty of times before (this week and beyond), things can always turn on a dime, leaving us no choice but to stay tuned.
Also published on Medium.