America’s standoff with Mexico is creating mixed reactions with stocks around the world. Tensions between the two nations have raised to an all-time high as Trump’s border wall plan stirs up a frenzy. All this controversy is adding more turbulence to the financial market. The S&P 500 Index slowed down while the Dow Jones is on the rise. Mexico’s peso took a tumble as the dollar cautiously raised. Gold slumped while crude soared. This mixed batch of results is highlighting the effects of the flaring dispute between the two neighboring countries.
Border Wall Tensions Cause Financial Chaos
It’s no secret that diplomatic relationships between Mexico & the United States is teetering on the edge. Since Trump signed an executive order, the border wall will be built. The only question is who is going to pay for it. Amidst growing outrage, Mexican President Enrique Peña Nieto cancelled his scheduled meeting with Donald Trump. This is just the beginning of a tumultuous political relationship with the new American president. While it isn’t surprising, the long-term consequences of a fall-out between Mexico & America could be catastrophic. As the showdown for the wall continues, the world’s largest bilateral trading relationship appears to be coming to an end.
This dispute isn’t only dividing nations, it stopped the bullish behavior of the financial markets dead in its tracks. New data showed that U.S. expansion remained on shaky ground. Rising bond yields slashed home purchases, while jobless claims beat predictions. The S&P 500 Index slid 0.1%, leaving it at 2,296.21. This was an abrupt halt after it exceeded expectations by topping 2,300. Despite the growing tensions, not all American stocks reported losses. The Dow Jones Industrial Average soared 11.81 points, reaching 20,080.32. Earlier this week they made history when they closed above 20,000 for the first time.
Even though America is embroiled in controversy, European stocks are on the rise. The Stoxx Europe 600 Index rose by 0.3%, with drug & healthcare companies leading the way. Swiss drug-producer Actelion Ltd soared by 22% after securing a $30 billion takeover by Johnson & Johnson. Germany also experienced surprising gains as the DAX hit a 20-month high.
The same conflicting reports can be found in international currencies. Against all odds, the dollar is still on the rise. The Bloomberg Dollar Spot Index rose 0.7%, making the biggest advance in a week. The Mexican peso lost a whopping 1.17%, reaching a 13% total loss since Trump’s election. The pound joined this decline with a 0.4% hit after making a 0.3% jump. This left the sterling at $1.258 as the U.K. economy growth exceeded forecasts in the fourth quarter. The Euro also fell by 0.5%, leaving it at $1.0692.
Commodities were just as volatile. Gold continued a three day tumble with a 2.4% loss. This was the largest fall in over a month, & China’s wavering gold purchases are directly to blame. Even though gold is falling, oil is on the rise. West Texas Intermediate crude soared by 0.7%, helping it exceed $53 a barrel. This increase was accredited to OPEC’s output cuts & its effects on U.S. crude stockpiles.
Even though the world’s political structure is getting shook up, the financial sector is marching on. Only time will tell if Mexico & the U.S. will settle their differences. The outlook may look bleak, but the show will go on. As Europe distances itself from America, the future of the U.S. economy looks very uncertain. Hopefully some sort of truce can be made before America completely alienates itself.