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Risk aversion was the name of the game during the Asian session as traders priced in new measures that could prevent China from acquiring U.S. tech.

  • Trump to announce new measures to control Chinese investment, tech exports to China – WSJ
  • BOJ: Q1 contraction based on temporary factors
  • BOJ: U.S. “protectionist trade policy” warrant close attention

Major Events/Reports:

Trump considering new measures against China?

Earlier today the Wall Street Journal cited “people familiar with administration plans” and reported that the Trump administration is considering two initiatives that might prevent China from realizing its “Made in China 2025” blueprint.

One of them is blocking firms with at 25% Chinese ownership (or less!) from buying companies that involved in “industrially significant technology.” Word around is that the exact percentage is still up for negotiation.

The National Security Council and the Commerce Department are also reportedly considering keeping U.S. technology exports from reaching China’s shores. Fortunately, the U.S. industry might have a chance to share their two cents before the rules go into effect.

WSJ’s report might not have such a strong reaction if the Donald hadn’t recently threatened “more than reciprocity” against “all countries that have placed artificial trade barriers and tariffs.”

Overall risk aversion

Asian session traders woke up on the bearish side of the market charts as they price in renewed trade war concerns. Nikkei was even hit harder thanks to the yen’s recent gains.

  • Nikkei is down by 0.40% to 22,427.5
  • A SX 200 is down by 0.35% to 6,213.2
  • Hang Seng is down by 0.38% to 29,227.5
  • Shanghai index is up by 0.17% to 2,895.742

Commodity prices also took hits, with crude oil slipping further after OPEC and friends decided to raise their output by 1 million barrels per day starting July.

  • Gold is down by 0.13% to $1,267.61
  • Brent crude oil is down by 2.02% to $74.25
  • U.S. WTI is down by 1.28% to $68.38

Major Market Mover(s):

AUD

The high-yielding Aussie took the most hits on news that the U.S. might step up its trade war tactics by making it hard for China to achieve its “Made in China 2025” blueprint.

Remember that Australia’s exports depend a lot on China’s demand, so the Aussie could lose value if there’s less demand for Australia’s exports.

AUD/JPY is down by 50 pips (-0.61%) to 81.32
AUD/USD is down by 16 pips (-0.21%) to .7424
AUD/CHF is down by 13 pips (-0.18%) to .7332
EUR/AUD is up by 37 pips (+0.24%) to 1.5699
GBP/AUD is up by 47 pips (+0.26%) to 1.7864

CAD

The Loonie got a one-two punch from a deterioration of risk sentiment and crude oil weakness.

USD/CAD is up by 32 pips (+0.24%) to 1.3292
CAD/JPY is down by 48 pips (-0.58%) to 82.41
EUR/CAD is up by 36 pips (+0.24%) to 1.5492
GBP/CAD is up by 46 pips (+0.26%) to 1.7629

JPY

The low-yielding yen was king of pips during the Asian session as renewed trade war concerns rocked the markets.

USD/JPY is down by 44 pips (-0.40%) to 109.54
CHF/JPY is down by 37 pips (-0.34%) to 110.90
GBP/JPY is down by 54 pips (-0.37%) to 145.28
EUR/JPY is down by 51 pips (-0.40%) to 127.67

Watch Out For:

  • 8:00 am GMT: Germany’ Ifo business climate (101.9 expected, 102.2 previous)