News & Analysis

Trade War Scare sets off wild moves – Dow Jones Plunges by 500 to recover 700plus; Gold hits 1348 before losing $15; Risk ends with strong recovery

Apr 5, 2018 | Market Updates

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Ôû© 18:30 GBP Services PMI
Ôû© 22:30 CAD Trade Balance

US markets – Hell of a night, from panic selling to support holds and surge buying! As trade lead up to last night’s London session China trade fears really ramped up and futures started crashing. At one stage the Dow Jones futures were more than 500 points lower. As new developments hit easing fears markets started to recover, ending with strong finishes in the session. The Dow closed 230.94 higher. The S&P500 closed 30.24 higher and the NASDAQ closed 100.82 higher.

Earlier in the session, the major averages fell sharply after China announced new tariffs that target up to $50 billion in U.S. goods, increasing worries that a trade war could take place in the near future. Fears subsided once as the White House tried to push back on the notion a trade war would break out. Larry Kudlow, Trump’s chief economic advisor, told reporters: “He wants to solve this with the least amount of pain…. this is a growth action. I can’t emphasize that enough.” Trump tweeted later in the morning: “We are not in a trade war with China, that war was lost many years ago.”

Companies kept up the hiring pace in March, adding 241,000 positions as employment in construction and manufacturing surged, according to a report Wednesday from ADP and Moody’s Analytics.

European markets – Finished lower suffering horror opens in lasts nights European session. Trade war fears sent futures and indices sharply lower. The GER30 traded 260 points lower at one stage. Markets did recover later in the session as fears subsided finishing mixed. The FTSE closed 3.55 higher. The DAX closed 44.55 lower the CAC closed 10.32 lower.

Oil – followed futures seeing sharp declines after trade war fears hit the markets. Prices parred loses after Energy Information Administration released data showing U.S. crude inventories fell by 4.6 million barrels in the latest week. Analysts had expected an increase of 246,000 barrels. “The report was mostly supportive with strong demand for crude oil from the 93 percent refinery utilization rate and the high level of crude oil exports of over 2 million barrels per day,” said John Kilduff, a partner at energy hedge fund Again Capital LLC in New York. Crude finished 14 cents lower.

Forex – Safe havens roared back to life during last night’s German and London session. The Japanese Yen being the main mover. JPY pairs traded sharply lower with loses of 50-100 pips. The USD also rallied to risk, as fears eased risk made its come back with strong gains seen to the Yen and USD. The AUDUSD closed 33 pips higher above .7700. The GBPJPY posted a 155 pip turnaround from its low. The USDCAD broke 1.2800 support to finish 32 pips lower. The USDJPY ended 20 higher after touching the 105 area again. Gold jumped to new weekly highs hitting 1348.22 before sellers kicked it back down to 1333 area. Bitcoin back in the seller’s radar has fallen back into the 6k area, weakening further this morning trading at 6646. Price is back testing February 5th lows.

USDJPY daily, price has moved back into a resistance area that has not been beaten since the 9th of March. Do buyers have the momentum to break out? Or will we see sellers hold the high and send price back lower?

Good trading from Eightcap.

Sources; CNBC. All times are AEST

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