Weak dollar restricting market rebound, say Barclays analysts
A weakened dollar may prohibit the full recovery of global markets, analysts have warned, as investors continue to suffer the fallout from the Trump tariff mayhem.
The DXY index, which tracks the dollar’s value against a basket of currencies, sank to its lowest in three years during Monday trading.
This came after markets plunged following President Donald Trump’s ‘Liberation Day’ levies as shareholders fled equities for safe haven investments.
The 90-day pause on tariffs allowed markets to claw back gains, but major losses remained.
The FTSE 100 is down over five per cent in the last month, France’s Cac 40 nearly ten per cent and Amsterdam’s AEX nearly seven per cent.
On Wall Street, the Dow Jones has slumped nearly four per cent and the S&P 500 nearly five per cent.
Barclays analysts said: “The 90-day pause on higher reciprocal tariffs was a welcome reprieve, but it by no means marked the end of the story.
“Erratic policy and governance likely cap the upside, as an edgy treasury market and weaker dollar undermine confidence.”
Quality stocks in favour due to recession risk
US bond yields have surged in the tariff fallout, spiking investor concerns.
The yield on a 30-year government bond has jumped as high as five per cent.
“The combination of rising US yields and depreciating dollar is fuelling credit concerns, making balance sheet strength a key differentiator for investors,” analysts said.
Because of this, analysts upgraded their view on ‘Quality’ European stock to ‘Positive’ and cut their rating on ‘Value’ to ‘Neutral’.
They added the long-term case for ‘Value’ stocks – those with high risk, high reward, – “remains positive” but worried about “crowded tactical positioning and higher recession risk”.
‘Quality’ stocks – the safer bets – are expected to “continue to work if recession and credit concerns keep growing”.
FTSE 100 giants HSBC and Unilever are among the index’s ‘Quality’ firms, whereas BT Group and ITV are considered ‘Value.’