THE DETAILS -The How, Where and Why
As investors digested the developments in Italy’s political situation, markets stabilized during Wednesday. The gains however came under assault on Thursday as trade war concerns were back on investors’ plate after the Trump administration announced its decision to impose strict import duties on Canada, Mexico and the European Union, which was met by severe criticism and with threats of equally measured tariffs on American goods.
Financial stocks were the worst hit during Monday’s session, as investors fearing a possible debt crisis flocked to safe haven assets like Treasuries, bringing down the 10-year Treasury yield at 2.78%. The 10-year Treasury yield however settled higher at 2.902% by the end of the week on the back of strong economic data, helping Financials stocks to recover some of the week’s losses. The sector was the worst performer this week, losing 1.65% (albeit gaining 1.18% in Friday’s relief rally) as weakness in Deutsche Bank’s stock further worsened sentiments.
Shares of U.S. steel and aluminum companies advanced during the early Thursday session after the Trump administration announced its plan to move ahead with the 25% and 10% tariffs on steel and aluminum imports, respectively, from European Union, Canada and Mexico , notably excluding China. Threats of retaliatory action of equal measures weighed down on these companies.
Industrials and Consumer Staples faced the brunt of investors in Thursday’s session, falling sharply by 1.45% and 1.61%, respectively (losing 1.00% and 0.17%, respectively for the week) as investors feared that a potential trade war could raise input costs of several international companies in these sectors, hurting their profitability.
Energy stocks gained a solid 3.11%, leading the index in Wednesday’s session, as oil prices soared for the first time in six sessions following reports that the OPEC will be maintaining their existing production curbs until the end of this year. But gains were reversed in Thursday’s session as U.S. oil prices fell after the Energy Information Administration (EIA) reported an increase in oil stockpiles. While Energy stocks gained 0.54% in Friday’s rally, they ended 0.19% lower for the week. Real Estate and Technology stocks were the top gainers for the week, up 2.13% and 2.05%.