Geopolitical developments took a potential turn for the worse at the end of the week as tensions heightened between the US and Russia in the wake of the US-led missile strikes on Syria and the latest round of US sanctions. President Trump had warned the Assad regime and its allies earlier in the week that they would pay a ‘big price’ following the suspected chemical attack in Syria which left over 70 people dead. Russia, which had already seen its main index fell 11% following the US’ sanctions on oligarchs and companies linked to Vladimir Putin, urged the US to avoid military action. The rising tensions lifted the price of oil to over US$70/barrel; a 50% increase from last June and a level not seen for three years.

Global trade grew at its fastest rate for 6 years in 2017, according to the World Trade Organisation (WTO), and the outlook is positive, but only if tensions between major economies do not escalate into a full-blown trade war. The tariffs imposed by Donald Trump on aluminum and steel from China kicked off a chain of retaliatory measures leading to China recently responding with its own tariffs on 128 US imports, which included soybeans, pork and fruits, aimed at crippling the US agricultural sector. In an attempt to put pressure on China, the President is now considering rejoining the Trans-Pacific Partnership (TPP), the organisation he withdrew from when he came to office, which resulted in US farmers being deprived of preferential duty rates with other members. The 11 members of the TPP would welcome back the US but only on their terms. In the meantime, analysts believe that China could use monetary policy to devalue its currency, thus making Chinese exports cheaper for Americans and mitigating the effect of the tariffs.

Needless to say, markets have seen continued volatility over the last few days but ended the week more than 1% higher. So far this year, the S&P 500 Index has either risen or fallen more than 1% in one day no less than 28 times. There were just eight similar sessions during the whole of 2017. The last time such volatility was witnessed at this point of the year was in 2009. The FTSE 100 Index has already recorded 15 daily movements of more than 1% compared to a total of 16 for 2017. Contributing to the weaker performance of the FTSE 100 has been the strength of sterling to the US dollar which currently stands at its highest level since the result of the EU referendum.