Another day, another chance to price in trade war-related headlines! High-yielding bets took hits across the board after the U.S. threatened another round of tariffs on China’s goods.
Interestingly, the safe-havens didn’t benefit much either.
- Japan’s core machinery orders (y/y) slips by 3.7% vs. 5.2% expected, 10.1% gain in April
- Japan’s PPI (y/y) up by 2.8% as expected vs. 2.7% increase in May
- Japan’s tertiary industry activity up by 0.1% vs. -0.4% expected, 1.0% previous
- AU Westpac consumer sentiment jumps by 3.9% vs. 0.3% uptick in June
- AU home loans rise by 1.1% vs. 1.9% decline expected, 0.9% decrease in April
- U.S. threatens additional $200B worth of tariffs on China’s imports
U.S.-China trade war heats up
The trade war plot thickens as the Trump administration confirmed rumors that it’s considering slapping on 10% tax on an additional $200B worth of Chinese goods.
U.S. officials even showed a list of goods that it’s planning to hit, which ranges from car tires, furniture, wood products, handbags and suitcases, to dog and cat food, baseball gloves, carpets, doors, bicycles, skis, golf bags, toilet paper and beauty products.
While rumors of additional tariffs have been going on since the previous session, traders hadn’t expected the U.S. Trade Representative Robert Lighthizer to be ready with a list of goods.
China has yet to announce retaliatory measures for the latest threats, but reps for China’s Commerce Ministry have said that they’re “shocked” by the U.S.’ announcement and repeated that it would take its case to the World Trade Organization.
Overall risk aversion
The confirmation of tariff rumors came in early Asian session trading, which is a convenient time for yen bulls and further magnified the markets’ reaction.
China’s equities markets were hit hard, while Japanese shippers and manufacturers were also knocked lower at the escalating trade war.
- Nikkei is down by 1.06% to 21,961.4
- A SX 200 is down by 0.80% to 6,233.2
- Hang Seng is down by 1.44% to 28,269.7
- Shanghai index is down by 1.87% to 2,774.779
Higher-yielding commodities like crude oil and copper were easily dragged lower by overall risk aversion. Heck, even gold failed to take advantage of the risk-averse mood!
- Gold is down by 0.38% to $1,250.74
- Brent crude oil is down by 0.99% to $78.07
- U.S. WTI is down by 0.76% to $73.58
Major Market Mover(s):
Aussie traders shrugged off better-than-expected lower-tier reports from Australia to price in the latest trade war headlines.
Remember that China is Australia’s largest trading partner and any hiccups in the world’s second largest economy could cause fever for Australia’s markets.
AUD/USD is down by 40 pips (-0.53%) to .7418; AUD/JPY is down by 37 pips (-0.45%) to 82.41; AUD/CHF is down by 36 pips (-0.49%) to .7361; EUR/AUD is up by 71 pips (+0.45%) to 1.5811, and GBP/AUD is up by 87 pips (+0.49%) to 1.7876
The high-yielding Kiwi followed the Aussie’s footsteps as New Zealand’s products also depend a lot on China’s demand.
NZD/USD is down by 24 pips (-0.35%) to .6813; NZD/JPY is down by 20 pips (-0.26%) to 75.68; EUR/NZD is up by 41 pips (+0.24%) to 1.7215, and GBP/NZD is up by 55 pips (+0.28%) to 1.9464.
The Greenback gained a pip or two against most of its counterparts as some Asian session traders caught up to the previous session’s dollar-buying spell.
USD/JPY is up by 10 pips (+0.09%) to 111.09; USD/CAD is up by 22 pips (+0.17%) to 1.3134; USD/CHF is up by 5 pips (+0.05%) to .9923, and GBP/USD is down by 12 pips (-0.09%) to 1.3262.
Watch Out For:
- 8:00 am GMT: ECB’s Draghi to give a speech in Frankfurt