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Dow five day losing streak – Trade war worries continue – Oil rebounds – EUR higher despite safe-haven demand

Jun 19, 2018 | Daily Market Outlook

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11:30 AUD Monetary Policy Meeting Minutes
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U.S markets finished mainly overnight, the Dow Jones posting a 5-day losing streak losing 103.01 points. Trade tensions continue to rattle investors. The S&P500 fell 5.91 but the NASDAQ gained 0.65 tech shares rose and Amazon hit an all-time high. Tariffs continue to be the main point, Trump advised 50 billion of new tariffs last Friday and China retaliated, putting forward 25% tariffs on 34 billion U.S. products.

“There are many problems with tariffs. First and foremost is that they benefit far fewer people than they harm,” said Ed Yardeni, president and chief investment strategist at Yardeni Research, in a note. “They are intended to boost employment in the industries that benefit from such protectionism, but they immediately raise prices of the protected goods for all consumers.” Still, stocks “may continue to zig and zag through the summer as the Jekyll and Hyde sides of Trump struggle to dominate his persona,” he said. “On the one hand, there’s Trump, the Deregulator and Tax-Cutter—his benevolent Dr Jekyll persona. On the other is Trump, the Protectionist—his dark Mr Hyde.”

Europe continued lower, factors in the UK, Germany, Italy and the continuing trade issues knocking investor confidence falt. The FTSE dropped 2.58 pts, as new forecasts from the British Chamber of Commerce showed that the economy is on track to grow at its weakest rate since 2009. The DAX lost 176.44 with political unrest building in the EU’s largest economy. Angela Merkel is facing the fight of her political life, as a major row over the country’s migration and refugee policy threatens to topple her from the post she has held since 2005. Rupert Stadler the boss of Volkswagens luxury brand was arrested on Monday Monday in relation to the German carmaker’s emissions test cheating scandal. Volkswagens shares finished 2.8% lower. Italy continues in the spotlight, Italian balance trade numbers showed a trade surplus of 2.9 billion euros in April, down from 3.693 billion a year ago.

Gold ended slightly higher after Friday’s whitewash. New tariff news sent it higher in this morning’s trade. Price $3.60 higher from yesterdays open but still remains in counter rally territory. Oil made a recovery overnight adding 1.2%. USOUSD closed 152 cents higher at $65.62. OPEC will meet in Vienna on June 22 to decide forward production policy, with Russia and Saudi Arabia pushing for higher output. China retaliated against U.S. tariffs on $50 billion of Chinese goods by imposing import duties on U.S. products, including crude oil. The trend remains down but while $64 holds we could see further buying. A lot will depend on the output amounts put forward on June 22/23.

The USD was supported by some safe-haven demand and signals from the Federal Reserve that it would increase overnight borrowing costs due to a tightening labour market and rising inflation. The Dollar gained to most majors but fell to the Yen and EUR. The EUR traded solo overnight ignoring JPY and USD strength. ECB comments looked to support it as it closed 34 pips higher to the USD and 23 pips higher to the JPY. The USDCAD tested new monthly highs hitting 1.3237. This morning’s tariff update ‘Trump says he has asked USTR to identify $200 billion in Chinese goods for additional tariffs at 10% rate.’ Has sent risk lower the Yen. The EUR GBP and AUD all trading over 20 pips lower. The USD is higher to the AUD but lower to the EUR and GBP.

Good trading from Eightcap.

Sources; CNBC – All times are AEST

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