News & Analysis

Trump’s support of new Chinese Tariffs hits stocks; Oil continues higher on supply worries; Yen kicks back knocking Majors lower

Aug 31, 2018 | Market Updates

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U.S indices snapped 4-day winning streaks last night. The Dow Jones lost 137 points – The S&P500 dropped 12.91 points and the Nasdaq closed 21.32 points lower. Bring an end to record-setting runs we’ve been seeing this week. The key that changed sentiment last night was news President Trump supports moving forward with proposed tariffs on an additional $200 billion in Chinese goods. Trade-sensitive stocks such as Boeing and Caterpillar hit session lows following the report’s release. Boeing 0.9% and Caterpillar dropped 2% dragging on the Dow. The Market continues to be very trade sensitive.

Phil Blancato, CEO of Ladenburg Thalmann Asset Management, called U.S.-China trade relations “the unknown” in the market. “We had some momentum when the U.S and Mexico struck a deal earlier in the week,” said Ryan Nauman, market strategist at Informa Financial Intelligence. “But as the deadline approaches, people are getting a bit worried.”

Emerging markets continue to simmer, “EM is weak over concerns about Turkey and Argentina,” said Michael Shaoul, chairman and CEO of Marketfield Asset Management. New hit overnight that Argentina raised rates to 60% to prop up the local currency!

Cboe Volatility Index considered the best fear gauge in the market, rose to its highest level since Aug. 17. In data, Jobless claims rose slightly to 213,000 last week but remained near multi-decade lows as the trend still points to a tightening labor market. Personal income rose 0.3% in July.

Europe set the tone early in the evening with sharp falls on the DAX, after a spirited fight back markets closed lower at the end of the session. The DAX losing 67 points lower the FTSE closed 47 points lower and the Euro Stoxx 50 closing 24 points lower. GAM tanked by 10.8% after Credit Suisse halved its price target for the stock. Market focus is largely attuned to global trade developments and continues EM worries.

This morning local and Asian indexes have followed leads and are trading in the red. The ASX200 -10 the Nikkei -111 and the Hang Seng is trading 252 pts lower.

Oil hit 6-week highs in last night’s trade prices supported by supply worries due to Iran and Venezuela and after a fall in U.S. crude inventories earlier this week. USOUSDhit $70 a barrel but settled 26 cents higher at  $69.80. A higher USD hit Gold last night as sellers cut $6.25 off price. The falls came late in the session as traders returned to safe havens due to the new China U.S trade worries.

Safe haven demand shocked risk currencies last night with the AUD seeing the main damage losing 47 pips to the USD and 106 pips to the Yen. Its worst single-day fall since March. The EUR and GBP held up better to the USD losing 35 and 15 pips respectively. The GBP continues to sail off its positive EU exit news. This on the Yen ledger where not as kind as the EUR fell by 70 pips and the GBP dropped 111 pips. The USD lost 71 pips to the Yen giving back all of this week s rally. The Yen found its feet last night as traders took flight to safety after trade concerns returned to the markets.

Bitcoin closed off lows last night after seeing a pullback to 6770. This morning buyers have basically clawed it all back prie rallying 115 USD to be sitting at 6959. Buyers have tested yesterdays open just above 7000. We’re looking for 6850 to continue as a support low.

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Sources; CNBC – All times are AEST

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