Emerging economic data of the U.S economy has so far managed to keep trade wars and related fears at bay. All eyes are now on the outcome of the G7 meeting in Quebec and that of the Federal Reserve, scheduled for next week.
On Monday, strong U.S. jobs data has offset worries of a trade war between the U.S. and China and the U.S. and EU, all of which could act as a drag against the lift-off of global economic growth; as a result, share indexes across Asia rose to their highest levels in two-and-a-half-weeks.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose by 1.0% while the Nikkei registered a gain of 1.3%. The biggest gainers were Tencent and Taiwan Semiconductor Manufacturing.
European stock markets are also expected to gain from the uplift, with investors expecting Britain’s FTSE and Germany’s Dax to rise by 0.3% and France’s Cac by 0.4%.
In the U.S., shares of tech companies pulled up the Nasdaq Composite 1.51% to 7,554 points, very close to its March high of 7,588 points. The S&P 500 however did not enjoy such a high due to concerns over continuing trade frictions.
In a related matter, finance ministers from the G7, conveyed to the U.S. Treasury Secretary Steven Mnuchin, their “unanimous concern and disappointment” over U.S. President Donald Trump’s imposition of import tariffs.
“The G7 is showing more divisions than unity, to the point where one has to wonder whether it is worth holding meetings,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “The G7 summit this weekend could be equally terrible. There’s even talk that Trump may not go. Concerns on trade frictions are likely to continue to weigh on markets”.
Despite all the negativity surrounding the U.S. economy, its economic strength have managed to keep bears at an arms length, for the moment.
U.S. jobs data released on Friday, showed an acceleration of jobs in the U.S. with its unemployment rate falling to 3.8%, its 18-year low. A tightening labor market could eventually fuel inflation.
“We had strong headline figures on employment but rise in wages was still well-contained and did not point to a sharp acceleration in inflation,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.
Strong U.S. employment data, along with a host of other economic data, which includes construction spending,consumer spending and industrial production suggests that the U.S. economy is once again gathering speed having expanded at an annualized 2.2% in the second quarter.
Given the strength of the U.S. economy, it is very likely that the federal reserve is likely to raise interest rates at its policy meeting, next week.
The greenback extended its rebound from Tuesday’s low of 108.115 against the Japanese yen and was seen trading at 109.50 yen.
The euro traded at $1.1665, little below Thursday’s high of $1.1725.