Dubai: Global equities may bounce-back this week as traders focus back on fundamentals amid ebbing fears of a trade war.

On Friday, the Dow Jones Industrial Average jumped 1.77 per cent to 25,335.74, after a volatile three days of trading. The Nasdaq Composite Index hit a record high to close at 7,560.81, up 1.7 per cent. The S&P 500 closed 1.74 per cent higher to 2,786.57.

“Most countries are wary of a trade war and I think there would be some sort of negotiations. Markets have brushed aside the prospects of a fully-blown trade war. I don’t see a reason why the rally will get derailed at the moment as we continue to see strong global growth,” Saleem Khokhar, head of equities at First Abu Dhabi Bank asset management group told Gulf News.

Friday’s job data showed that employers hired the most workers in almost two years and wages remained stagnant, allaying fears the Federal Reserve may accelerate its rate-hike schedule.

“The volatility that we saw came through when we witnessed an inflation scare and perceived hawkish comments from the Fed’s chair Powell. The growth is strong, earnings are strong, inflation remains under control.

Provided we don’t get an underlying political headwind, we would continue to rally, but we expect a higher level of volatility compared to what we saw last year,” Khokhar said.

Global markets witnessed the levels of volatility not witnessed in the past few years, when the volatility index or popularly known as the VIX jumped to more than 50 levels on expectations of higher inflation and faster than expected rise in interest rates. The situation became more tense after US President Donald Trump announced plans to impose steel and aluminium tariffs, which analysts expected to turn into a full-blown trade war.

Overdone

UBS’ Mark Haefele thinks that the negative reaction in markets may be overdone.

“We don’t believe Trump’s tariff announcement significantly alters the positive outlook for global economic growth. Trump’s order has not been finalised, and the details will matter. Some countries may be excluded, reducing the impact of the tariffs. Even in their current headline form, the tariffs’ impact on aggregate inflation and demand should be negligible,” Mark Haefele, global chief investment officer at UBS said.

Trump signed orders to levy 25 per cent duty on steel and 10 per cent on aluminium, to be effective in 15 days, and excluded Canada and Mexico, leaving the doors open to sparing other countries.

UBS sees a 20-30 per cent chance of a full-scale trade war over the next six to 12 months.