Equities recover while US-China trade tension resurface

US stock market recovered last week while the US government launched a national security probe into car imports that could lead to new tariffs. The SP 500 closed up 0.3% and the ICE dollar index rose 0.6% for the week.

The SP 500 declined every session last week except Monday and Wednesday. It rallied 0.7% Monday after Treasury Secretary Steven Mnuchin’s comment over the weekend the Trump administration would delay implementation of tariffs on Chinese goods and “put the trade war on hold” while the countries are negotiating. The broad market index pulled back 0.3% Tuesday after President Trump’s assessment of the ongoing US-China trade talks he was “not really” happy with the progress of negotiations which “have a long way to go”. It recouped the previous day’s loss Wednesday buoyed by dovish Fed meeting minutes which showed policy makers supported a gradual pace of interest rate increases and will likely not opt for more aggressive monetary tightening. The SP 500 slid 0.2% Thursday. It lost 0.2% Friday led by energy shares.

The ICE US dollar index rose every session last week except Monday and Thursday. The dollar weakened 0.2% Monday. It rose 0.2% Tuesday. The ICE dollar index added 0.4% Wednesday as the composite PMI rose to 55.7 in May from 54.6 in April. The dollar index slipped 0.2% Thursday as initial jobless claims rose by 11,000 to 234,000. The dollar gained 0.5% Friday as core durable goods orders rose 0.9% on month in April.

The US GDP report on Wednesday, the euro-zone inflation report on Thursday and US jobs report Friday are the major economic events this week. While the US economic growth is forecast to remain steady at 2.3% over quarter rate, the euro-zone inflation is expected to rise to 1.6% in May from 1.3% in April.