Equities plunge after hawkish Fed and escalation of tariff war

Dashing of Federal Reserve easing cycle hopes and the threat of new 10% tariff on $300 billion of Chinese imports from September 1 acted jointly to reverse global stock market rebound last week. The SP 500 fell 3.1% while the ICE US dollar index advanced 0.1%.

All six largest developed market indexes plunged last week. Hang Seng recorded the biggest drop: it sank 5.2%. Four out of six major currency pairs reversed previous week’s dynamics, while the range of major currency pairs’ weekly fluctuations doubled as it shifted abruptly lower. The Pound was the leader in terms of percentage change: it slumped 2.4% against the US dollar.

Central bank news will dominate this week’s calendar of economic events besides developments on US-China trade war front after Chinese’s yuan breached the level of 7 yuan per dollar. Federal Reserve voting members will speak on Monday, Tuesday and Wednesday. And central banks of Australia, New Zealand and India will announce interest rate decisions this week together with three other Asian central banks.