Tariffs, rate warnings, and tech selloffs shape trading sentiment

16 October 2024

Li Xing Gan

Financial markets strategist

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How will tariffs, rate warnings, and tech selloffs shape your next trade? Exness expert Li Xing Gan breaks down the key market shifts and what they mean for traders.

This week’s updates bring a mix of geopolitical posturing, central bank caution, and shifting market dynamics, all of which are weighing heavily on investor sentiment. From Donald Trump’s pro-tariff stance to Japan’s slow inflation and China’s surging aluminum production, traders are watching closely. For CFD traders, these developments across stocks, commodities, and forex present both opportunities and risks. Let’s break down the key news and how it could shape market movements in the near term.

Trump calls tariffs "The most beautiful word"

In a recent interview, former US President Donald Trump lauded tariffs as a vital tool for protecting American interests, specifically targeting China and Mexico. Trump also voiced concerns over foreign ownership of US companies, positioning tariffs as a solution to economic exploitation.

Impact on markets: Tariff rhetoric typically raises concerns over global trade tensions, and Trump's comments could reignite fears of protectionist policies. US equities, particularly those with significant international exposure, might feel the heat if trade disputes escalate, while the dollar could gain ground as a safe-haven asset. For traders, this could mean increased volatility in sectors like manufacturing and technology, which are most vulnerable to tariff impacts. Forex traders should monitor the USD/CNY and USD/MXN pairs for potential shifts.

BoJ sticks to gradualism as inflation slows

Japan’s central bank, led by Governor member Seiji Adachi, has reiterated its cautious approach to interest rate hikes. With consumer inflation expected to slow to 2.3% in September, the Bank of Japan (BoJ) is likely to maintain its current rate policy to avoid triggering deflationary pressures.

Impact on markets: This dovish tone from the BoJ suggests that Japanese equities could receive a temporary boost from continued low borrowing costs, particularly in interest-rate-sensitive sectors like real estate and consumer goods. However, the yen may face downward pressure in the forex market, as traders may interpret Japan’s hesitation as a sign of economic weakness. Forex traders could explore opportunities in the USD/JPY or EUR/JPY pairs, where the yen might weaken relative to other major currencies.

China’s aluminum production soars despite economic slowdown

Despite a cooling economy, China is expected to ramp up its aluminum production through the end of the year, projecting a 3% increase in output for the fourth quarter. Strong demand for clean energy applications is keeping aluminum markets tight, supporting high prices and keeping inventory levels low.

Impact on markets: This rise in aluminum production could have positive implications for global commodity markets, particularly for traders in metals and related stocks. As demand from renewable energy and electric vehicle sectors remains robust, aluminum prices are likely to stay elevated, offering CFD traders potential long positions in the commodity. Additionally, Chinese stocks related to industrial production and clean energy could see a boost, even as broader market sentiment remains cautious.

India faces market risks amid slowing profit growth

India’s record-breaking 11-month stock market rally faces mounting risks, as analysts predict minimal earnings growth for the September quarter. Global funds have pulled over $7 billion from Indian equities in October, raising concerns over high valuations and weakening economic indicators.

Impact on markets: A slowdown in profit growth may dampen investor enthusiasm for Indian equities, potentially triggering further outflows from the stock market. CFD traders with exposure to the Nifty 50 or Sensex indices may want to consider short positions or look for opportunities in defensive sectors like healthcare and utilities. On the forex front, the Indian rupee could face more downside pressure, particularly if foreign fund outflows continue, opening up trading opportunities in the USD/INR pair.

Tech selloff drags Asian stocks lower

Asian stocks took a hit this week, with a tech selloff driving investor concerns, particularly in the semiconductor industry. Dutch chip giant ASML slashed its 2025 outlook, contributing to declines across major markets. Chinese stocks, too, fell sharply, with the Shanghai Composite and Hang Seng both down more than 10% from recent highs as optimism fades over government support for economic recovery.

Impact on markets: The tech selloff presents potential trading opportunities for short-term bears in the semiconductor sector. With companies like ASML cutting their forecasts, tech-heavy indices such as the NASDAQ and related ETFs could remain under pressure. For CFD traders, this could signal opportunities to short tech stocks or explore defensive sectors that tend to outperform during market downturns. Additionally, further weakness in Chinese equities could impact global indices, adding to volatility in both Asian and US markets.

Gold and silver poised for record highs

Safe-haven assets are once again in focus, with gold prices projected to hit new record highs, climbing nearly 10% to $2,917.40 an ounce within the next year. Silver is also expected to outpace gold, with forecasts predicting a more than 40% increase to $45 an ounce. Demand from central banks and geopolitical risks are supporting these bullish forecasts.

Impact on markets: For commodity traders, gold and silver present attractive long-term opportunities. The precious metals are likely to benefit from global economic uncertainty, making them ideal safe-haven assets for traders seeking to hedge against inflation and market volatility. CFD traders can capitalize on price movements in these commodities, while also keeping an eye on central bank policy shifts that could further fuel demand for gold and silver.

Key takeaways for traders: Opportunities and risks ahead

  1. Trump’s tariff comments: Trade tensions could impact US equities and the dollar, creating potential volatility in international sectors.
  2. BoJ’s dovish stance: A cautious approach to rate hikes may weaken the yen, opening up forex opportunities against stronger currencies.
  3. China’s aluminum output surge: Tight commodity markets could support higher prices, providing opportunities in aluminum and clean energy sectors.
  4. India’s market risks: Slowing profit growth and fund outflows may dampen Indian equities, with potential downside for the rupee.
  5. Gold & silver outlook: Safe-haven demand remains strong, with both metals poised for significant gains, offering long positions in commodities.

As these global developments unfold, traders should remain alert to potential shifts in sentiment and market dynamics. With opportunities across equities, commodities, and forex, flexibility and a strategic approach will be key to navigating the volatility ahead.

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