Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them.
1/WAR CRIES
If fears of a trade war between the world’s two largest economies, the United States and China, weren’t enough to set the nerves racing, the two sides are butting against each other in the South China Sea again and Donald Trump has just tossed in the threat of another U.S. government shutdown.
However, some experienced analysts suggest that the rout in stocks may not point to panic over a full-scale trade war.
2/HUNG, DRAWN AND QUARTERED
The first quarter draws to a close, and what a quarter it has been. Investors have had a lot thrown at them - from the biggest ever rise in stock market volatility to rapidly escalating tensions over global trade, deepening tumult in the White House and tech sector wobbles.
The market “melt-up” they all talked about in January has melted away, the Dow and S&P are down for the year, and the outlook for Q2 is a great deal more uncertain. Global trade tensions are now infecting investor sentiment and risk appetite, there are signs that growth has peaked (particularly in Europe), rising dollar interbank rates show no sign of reversing, and the global liquidity pool will shrink this year.
3/GROWING TO PLAN
The final U.S. government read on fourth quarter GDP on Wednesday will come hot on the heels of the Federal Reserve’s first interest rate hike of the year.
In theory it should be reassuring. The United States is a fairly closed economy, and in the fourth quarter Donald Trump was dishing out tax cuts, not threatening trade wars.
4/SELL EUROPE?
High expectations for European stocks in 2018 have not been met. Euro zone and UK business confidence data due out next week will either inflame or soothe concerns that the region’s economic momentum may be starting to wane.
Morgan Stanley equity strategists say Europe is now seeing record outflows versus the United States, and even the popularity of French President Emmanual Macron - elected last year with a strong mandate to reform rigid labor markets - has now hit an all-time low in the polls.
5/UNFRIENDED
The Facebook shock has been a hugely significant moment in this long-running bull market. Tech and internet stocks – such as the fabled FAANGs and BATs – have dominated and driven the equity rally of the past 2-3 years – mainly because the digital revolution underlying the boom in those companies was seen as largely impervious to shifting political winds or even ebbs and flows in the economic cycle.
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