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The U.S. might have struck a temporary deal with the EU, but China just reminded us that Uncle Sam is still waging trade war with the world’s second largest economy.

  • Japan’s service producer price index up by 1.2% vs. 1.0% expected and previous
  • Australia’s import prices (q/q) improves by 3.2% vs. 1.9% expected, 2.1% previous

Major Events/Reports:

China kills major U.S. merger deal

Two years of negotiations for U.S. chipmaker Qualcomm (QCOM) went down the drain today after it failed to meet regulatory requirements within a self-imposed deadline.

The company’s efforts to acquire Dutch chipmaker NXP Semiconductors (NXPI.O) at $44 billion would have been the world’s biggest semiconductor takeover. The buyout could have helped Qualcomm, which provides chips to Android smartphone makers and Apple, expand into new market areas like automotive chips.

Qualcomm needed Beijing’s okay because China accounts for nearly two-thirds of its revenue. However, a deadline at midday on Thursday in Asia passed without word from China’s regulator.

The San Diego-based firm has announced its plans to kill the deal by the end of the day, pay NXP a $2 billion breakup fee, and focus on buying $30 billion worth of its stocks.

Markets saw the move as the latest punch in the ongoing U.S.-China trade war. If you recall, Trump already called China “vicious” for targeting American agriculture exports.

If the POTUS responds by giving Chinese company ZTE more heat or upping his game against China’s goods, then we might see a bit more risk aversion in the markets.

Reality check for the bulls

The Qualcomm deal was a reality check for market players who celebrated Trump and Juncker’s “deal” in the previous trading session.

Analysts now point out that China and the U.S. also agreed to work on their trade relations before they started threatening (and implementing) tariffs on each other.

It also didn’t help that the meeting was still pretty much a nothing burger despite the announcements. The U.S. is still implementing its steel and aluminum tariffs with no guarantee that it would hit the EU’s auto exports down the road.

For now, though, traders are cautiously optimistic (more cautious than optimistic, tbh) that the U.S. and EU are still talking.

  • Nikkei is down by 0.10% to 22,590.8
  • A SX 200 is down by 0.16% to 6,242.6
  • Hang Seng is down by 0.74% to 28,707.9
  • Shanghai index is down by 0.63% to 2,885.290

Commodity prices were a mixed bag of nuts with Brent crude oil finding support from Saudi Arabia temporarily suspending its oil exports through the Red Sea late following attacks on its carriers.

  • Gold is down by 0.03% to $1,231.00
  • Brent crude oil is up by 0.14% to $69.32
  • U.S. WTI is down by 0.09% to $74.31

Major Market Mover(s):

AUD

The Aussie took the most hits as traders stayed away from higher-yielding bets amidst risk aversion.

AUD/USD is down by 16 pips (-0.21%) to .7439; AUD/JPY is down by 34 pips (-0.41%) to 82.39; AUD/CHF is down by 17 pips (-0.24%) to .7376; AUD/NZD is down by 24 pips (-0.22%) to 1.0880; AUD/CAD is down by 26 pips (-0.26%) to .9700, and EUR/AUD is up by 39 pips (+0.25%) to 1.5769.

JPY

Not surprisingly, the low-yielding yen found some support on a risk-averse trading environment.

USD/JPY is down by 23 pips (-0.21%) to 110.75; EUR/JPY is down by 22 pips (-0.17%) to 129.93; CAD/JPY is down by 12 pips (-0.14%) to 84.94, and NZD/JPY is down by 12 pips (-0.15%) to 75.73.

GBP

There were no catalysts to inspire the move, but the British pound gained a pip or two across the board today.

GBP/USD is up by 13 pips (+0.10%) to 1.3201; EUR/GBP is down by 5 pips (-0.05%) to .8887; GBP/JPY is down by 15 pips (-0.10%) to 146.21; GBP/CHF is up by 8 pips (+0.06%) to 1.3088, and GBP/AUD is up by 56 pips (+0.31%) to 1.7744.

Watch Out For:

  • 6:00 am GMT: Germany’s GfK consumer climate to remain at 10.7?
  • 7:00 am GMT: Spain’s unemployment rate (15.8% expected, 16.7% previous)
  • 11:45 am GMT: ECB’s policy decision (Read Forex Gump’s trading guide if you’re planning on trading the event!)