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Trade War Hits Dollar but Boosts Gold

Article By: ,  Senior Market Analyst
April 4, 2018 12:31 PM

The FTSE 100 index traded down Wednesday but came off the 6,996 low as the day’s focus was firmly on the intensifying trade dispute between the US and China. The dispute caused the Dow Jones Industrial Average to fall 500 points at the start of trading while the S&P 500 and the Nasdaq traded 0.92% and 0.99% lower, respectively.

China retaliated to the US decision to introduce a 25% tariff on $50 billion worth of Chinese imports by blacklisting over 100 US products worth the same amount including soybeans, chemicals and US cars. Interestingly, both sides left the starting day open. China’s finance ministry which made the announcement did not mention when the tariffs will take effect. US companies can oppose the decision until 25 May.

Trade war hits dollar but boosts gold

The dollar weakened in response to China’s decision and GBP/USD traded at 1.4080, up 1.6% while EUR/USD firmed to 1.2294, up 0.19%.

The yields on 10-year US Treasury notes dropped 3.5 basis points to 2.753% on fears about what China might decide next, given that the country holds more than $1 trillion of US debt.

Gold, however, benefited from the China/US tit-for-tat. It attracted significant safe haven buying and prices rose to the highest level in a week to trade at $1,348.06 a troy ounce.  

Mining shares hit by China-US trade war

Shares of mining companies were worst hit by the US-China trade spat on fears that the dispute would affect China’s metal imports. China is the biggest global buyer of metals and accounts for almost a half of the demand for most of the major metals. Gold miner Anglo-American traded down 3.85%, diversified miner Rio Tinto traded down 2.9% while Anglo-Australian iron ore and metals producer BHP Billiton traded 2.8% lower. Even major metals trading house Glencore was not spared, falling around 2.91%. The company is a large producer of zinc with China being one of its main markets.  

Morrisons rises at data shows it had beat rivals

Supermarket chain WM Morrisons was one of the best performing stocks of the day after the latest data from Kantar Worldpanel showed it continued to outperform the other top four UK supermarkets except Tesco. Macquarie Bank already upgraded its rating Morrison to outperform. In the three months to 25 March its sales grow by 2.4%. Tesco’s sales also expanded by 2.4% but the big retailer’s shares rose less, up 1.43%. The cold spell in March, “The Beast from the East,” which brought snow and below-zero temperatures, cost the big UK retail shops £22 million in lost sales as customers stayed at home rather go shopping.


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