Investing.com – Top 5 things that rocked U.S. markets this week.
1. Shots Fired: US-China Trade War Sends Dow Into Correction Territory
The Dow Jones slumped more than 1,100 points between Thursday and Friday, ending the week in correction territory (down more than 10% from its recent high) as the trade-war fear gauge moved up a notch.
U.S. President Donald Trump’s decision to sign an executive memorandum, imposing tariffs on up to $60 billion in Chinese imports proved to be touch paper for a selloff in US stocks as the Dow slumped more than 700 points on Thursday.
Trump’s first salvo aimed directly China was met with a swift response from Beijing, who appeared more than ready, releasing a dossier of potential retaliation targets on 128 U.S. products.
The potential targets include wine, fresh fruit, dried fruit and nuts, steel pipes, modified ethanol, and ginseng, according to a statement on China's commerce ministry website. Those products could see 15% duty, while a 25% tariff could be imposed on U.S. pork and recycled aluminium goods.
Yet, it wasn’t all doom and gloom in US stock markets this week as Dropbox Inc (NASDAQ:DBX) impressed on its public-listing debut, closing 35% higher at $28.48. Dropbox’s IPO price was $21 a share.
Dropbox is a leading provider of cloud content management solutions, boasting 11 million paid users, over 300,000 paying business teams, and over 500 million registered users.
The Dow fell more than 400 points on Friday.
2. WTI Gets Surprise Boost Falling US Crude Supplies
Crude oil prices rose more than 5.5% this week as an unexpected draw in U.S. crude supplies, rising geopolitical tensions and Saudi energy chief jawboning stoked demand.
Saudi Crown Prince Mohammad Bin Salman’s visit to Washington this week was long heralded as the ideal event for U.S. President Trump to toughen sanctions against Iran as both Trump and Mohammad Bin Salman do not favor the Iran nuclear deal.
“The Iran deal is coming up. It’s probably another month or so, and you’re going to see what I do,” Trump said earlier this week. “But Iran has not been treating that part of the world or the world itself appropriately. A lot of bad things are happening in Iran.”
An unexpected fall in U.S. crude supplies, meanwhile, also helped crude extend gains. The best was saved for last, however, as crude settled 2.5% higher on Friday after Saudi Energy Minister Khalid al-Falih said OPEC and non-OPEC members could extend production cuts into 2019 to reduce global oil inventories.
On Friday U.S. crude futures rose $1.58, or 2.46% to settle at $65.88 a barrel.
3. Dollar Slumps as Fed Fails to Add Fourth Rate Hike
Trade war fears and a somewhat disappointing Federal Reserve outcome weighed on the dollar as it struggled to hold gains.
The Federal Reserve, despite hiking rates by 0.25%, failed to add a fourth rate hike to its monetary policy projections while scaling back its labor market expectations.
Some argued that the Fed’s decision to raise its growth rate but keep its outlook on inflation relatively unchanged was dovish.
"Just 0.1% was added to core-PCE for 2019 and 2020, with both now at 2.10%. We're reading this as somewhat dovish because the Fed is anticipating benign inflation despite nearly 3% growth," Bank of Montreal said.
The dollar fell to five-week lows against its rivals.
4. Gold Glitters Once More
Gold prices enjoyed one of their best weeks in more than a month buoyed by a flight-to-safety as investors opted for safe-haven demand amid growing concerns about a U.S.-China trade war.
The rally in gold prices was also supported by a less hawkish than expected Federal Reserve as the US central bank kept its outlook on inflation and rate hikes for this year unchanged. The central bank did, however, signal a faster pace of monetary policy tightening, upping its outlook on rates for both 2019 and 2020.
Despite the sharp rally in gold prices this week, data showed traders continued to slash their bullsh bets on gold.
CFTC COT data showed money managers reduced their net long positions in gold futures to 148,700 lots from 167,900 lots for the week ended March 23.
5. Bitcoin's Promising Rally Fades
Bitcoin’s promising start to the week fell apart as the popular digital currency’s move above $9,000 was met with strong resistance.
Bitcoin rallied from a low of $7,240 to high of $9175.20 on Bitfinex exchange amid easing fears that the G20 meeting – which got underway Monday – would serve as the breeding ground for plans to crackdown on cryptocurrencies.
Finance ministers and central bankers from the world’s 20 largest economies called on regulators to “continue their monitoring of crypto-assets” but stopped short of any specific action to regulate cryptocurrencies.
Japanese regulators’ warning to Binance – the world’s largest exchange crypocurency exchange by traded value – for operating in the country without registration also weighed on sentiment.
Fears of disruption to Binance has since eased, however, as the Binance CEO, Chief Executive Officer Zhao Changpeng confirmed the company would open up an office in Malta.
Bitcoin and the wider cryptomarket has struggle find their footing after coming under heavy selling pressure in recent weeks amid scant demand.
The total cryptocurrency market cap at $331 billion – at the time of writing – remained close to levels last seen following the so-called “bloodbath” in Feb. 6.
Bitcoin rose 2% over the past seven days, Ripple XRP fell 8.93% over the same period on the Poloniex exchange, while Ethereum fell 14.20%.