Our Comments and Expectations
External Background. On Friday, the S&P 500 index suffered a sharp decline of 2.7%. Nearly all sectors fell, except for defensive utilities and consumer staples. The trigger was the resurfacing of the long-forgotten trade war theme after Donald Trump’s social media post announcing plans to raise tariffs to 100% and stating that he saw “no reason” to meet with Chinese President Xi Jinping, citing recent “hostile” export control measures.
His post followed a series of moves by both the U.S. and China aimed at potentially restricting technology and materials flows between the two nations. The deterioration in relations now appears to undermine any positive ground for talks between the two presidents in Asia later this month.
However, the threats of restrictions on technology and materials exchange remain only verbal so far, with neither side implementing the proposed measures. Later, Trump hinted that he was open to making a deal with China, which improved market sentiment this morning.
On Friday, European indices fell between 0.9% and 1.5%, but futures are showing a 0.3% gain this morning. Commodities are also rebounding after oil plunged nearly 5% to $62.1 a barrel and copper dropped 4.5%. S&P futures have recovered nearly half of their losses, up 1.3% this morning. Gold, as a safe-haven asset, is regaining strength and returning toward record highs. In Asia, the biggest decline was seen in Hong Kong’s Hang Seng Index — down 3.5%.
Bonds. The yield on 10-year U.S. Treasuries fell to 4.05% on Friday as traders flocked to safe-haven assets. High-yield bonds declined to their lowest level since July 16, following the equity market’s drop.
KASE Index. The KASE index fell 0.2% on Friday, as expected, slowing near resistance levels. Today’s session may turn out mixed amid oil’s decline and partial recovery, along with volatility in Western markets.
Equities. Most stocks showed moderate declines on Friday, reflecting the market’s overall slowdown as the KASE index tested resistance levels. Today, traders’ reaction may be either negative, following Friday’s external sell-off, or mildly negative, as investors pause to observe the recovery of global markets. In general, our GDRs, which traded during Trump’s post and the U.S. sell-off, showed moderate performance — suggesting investor calm. Kaspi was hit the hardest, being directly affected by U.S. market sentiment and remaining in a downward trend.
Currency. On Friday, the U.S. dollar fell to 536.7 tenge, driven by a sharp increase in the base rate and a stronger ruble. Today, we are watching how the USDKZT reacts to falling oil prices, as the tenge has shown little pressure from Kazakhstan’s main export commodity in recent weeks.