US President Donald Trump 6
US President Donald Trump and China’s President Xi Jinping shake hands in Beijing last year. Both leaders will discuss trade on the sidelines of a Group of 20 summit in Argentina at the end of this month, continuing efforts to resolve the US-China trade and tariffs war. Image Credit: AFP

Dubai: Global equities will be entering into a volatile week ahead of the Group of 20 meeting. Stocks have been battered by a sell-off in technology shares and oil amid concerns over trade wars and expectations of a faster rise in interest rates.

The Dow Jones Industrial Average fell 0.7 per cent at 24,285.95 on Friday, after losing nearly 4 per cent last week. The Dow and S&P 500 posted their worst Black Friday performance since 2010. The index has given up all the gains registered so far in the year, with a 1.75 per cent fall since January.

“It’s starting to feel a lot like Christmas, but that’s not from cheery perspective mind you, but instead, traders are beginning to fold their cards as the markets have that remarkable tendency to swing one way into year end. But with month-end approaching and when combined with year-end flows, markets could get messy and noisy next week,” Stephen Innes, Head of Trading APAC at OANDA said.

Last year, the Dow Jones index gained more than 500 points before traders closed their books to re-position in various asset classes in the new year.

Great expectations

Investors will be also be looking for a sneak peek on the global trade war amid mixed signals from the Chinese and the US. Trump and his Chinese counterpart Xi Jinping are expected to hold talks during the G20 summit on Friday or Saturday in Buenos Aires.

“A lot is expected from the meeting on the trade front as US president Donald Trump and Chinese President Xi Jinping are scheduled to meet and discuss a possible trade deal. It is also speculated that there will be some discussion on oil prices ahead of the formal Opec meeting next month,” Aditya Pugalia, Director, Financial Markets Research at Emirates NBD said.

With month-end approaching and when combined with year-end flows, markets could get messy and noisy next week.

- Stephen Innes, Head of Trading APAC at OANDA

Donald Trump suggested last week that China may not impose more duties on US products, soothing frayed investor nerves, but Wilbur Ross, the US commerce secretary said that trade deal with China was “impossible” before January. Separetley, Chinese President Xi Jinping and US Vice-President Mike Pence traded barbs at a summit as both tried to blame each other for protectionist measures.

But overall, UBS considers the recent sell-off as overdone even as valuations become more compelling.

“In our tactical asset allocation, we recently increased our overweight to global equities on the view that the markets are already pricing in growth and trade risks. Consequently, we think that the risk-reward for owning equities is asymmetric to the upside over the next six months,” Mark Haefele, Global Chief Investment Officer at UBS said.