Markets retreat from recent highs | Calamatta Cuschieri

U.S. stocks closed lower on Friday, but well off the lows of the sessions as investors looked past signs of escalating Washington-Beijing trade tensions. The Dow Jones Industrial Average DJIA, -0.34% fell 84.83 points, or 0.3%, to 25,090.48, having dropped 280 points at session lows. A potential trade war is seen as a major headwind for markets but which has so far had a more timid effect on equities.

Meanwhile, European markets also closed in the red but retained weekly gains, with the UK’s FTSE 100 pulling back from a nearly four-week high with mining stocks knocked the most by worries from the US-China trade spat. Germany’s DAX 30 retreated by 0.7% to 13,010.55, but posted a 1.9% weekly advance, and Spain’s IBEX 35 dropped 1.1% to 9,851, but held on to a 1.1% weekly climb.

The week ahead

Opec Meetings

Members of the Organization of Petroleum Exporting Countries (OPEC) will be holdings multiple meetings and summits throughout the week to discuss a compromise agreement that would see an oil production increase of between 300,000 and 600,000 barrels a day over the next few months. While Iran said on Sunday it’s opposed to any increase to current quotas, officials from a number of other countries are optimistic that an agreement can be won for a relatively modest hike.

OPEC and other exporters including Russia appear poised to ease voluntary production limits, which have helped shrink a global oil glut since they went into effect in January 2017. The deal isn't set to expire until the end of the year, but rising prices fueled largely by geopolitical risks have forced the producers to consider their exit strategy.

US-China Trade war

The first moves in a potential trade war between the United States and China have been made and Beijing is poised to match Washington blow-for-blow. In his announcement of tariffs on Chinese goods on Friday, Trump vowed additional duties if China retaliated -- which Xi Jinping immediately did. Details of U.S. restrictions on investments from China will follow in the coming weeks.

Aside from slapping tariffs on American products, China’s arsenal of potential retaliatory measures is formidable, and it could inflict heavy punishment on the more than $200 billion of investment by American companies in China. Increased safety inspections and delays in approving imports are possible tools, as is consumer boycotts of American goods sold in China’s rapidly growing retail market, or stemming a flow of free-spending tourists to the U.S.

Disclaimer: This article was issued by Peter Petrov, Junior Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.